Xinjiang Xinxin Mining Industry Co., Ltd. (HKG:3833) Shares May Have Slumped 48% But Getting In Cheap Is Still Unlikely

Xinjiang Xinxin Mining Industry Co., Ltd. (HKG:3833) shares have retraced a considerable 48% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 241%.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Xinjiang Xinxin Mining Industry's P/E ratio of 12.1x, since the median price-to-earnings (or "P/E") ratio in Hong Kong is also close to 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been quite advantageous for Xinjiang Xinxin Mining Industry as its earnings have been rising very briskly. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Xinjiang Xinxin Mining Industry

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Xinjiang Xinxin Mining Industry will help you shine a light on its historical performance.

Is There Some Growth For Xinjiang Xinxin Mining Industry?

Xinjiang Xinxin Mining Industry's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings growth, the company posted a terrific increase of 454%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

This is in contrast to the rest of the market, which is expected to grow by 27% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Xinjiang Xinxin Mining Industry's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent earnings trends is likely to weigh down the shares eventually.

The Bottom Line On Xinjiang Xinxin Mining Industry's P/E

Following Xinjiang Xinxin Mining Industry's share price tumble, its P/E is now hanging on to the median market P/E. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Xinjiang Xinxin Mining Industry revealed its three-year earnings trends aren't impacting its P/E as much as we would have predicted, given they look worse than current market expectations. Right now we are uncomfortable with the P/E as this earnings performance isn't likely to support a more positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware Xinjiang Xinxin Mining Industry is showing 2 warning signs in our investment analysis, you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a P/E below 20x.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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