Some Confidence Is Lacking In Biosino Bio-Technology and Science Incorporation (HKG:8247) As Shares Slide 38%

The Biosino Bio-Technology and Science Incorporation (HKG:8247) share price has fared very poorly over the last month, falling by a substantial 38%. For any long-term shareholders, the last month ends a year to forget by locking in a 53% share price decline.

Although its price has dipped substantially, given close to half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") below 9x, you may still consider Biosino Bio-Technology and Science Incorporation as a stock to avoid entirely with its 24.2x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

We'd have to say that with no tangible growth over the last year, Biosino Bio-Technology and Science Incorporation's earnings have been unimpressive. It might be that many are expecting an improvement to the uninspiring earnings performance over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Biosino Bio-Technology and Science Incorporation

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Biosino Bio-Technology and Science Incorporation's earnings, revenue and cash flow.

Is There Enough Growth For Biosino Bio-Technology and Science Incorporation?

Biosino Bio-Technology and Science Incorporation's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. The longer-term trend has been no better as the company has no earnings growth to show for over the last three years either. So it seems apparent to us that the company has struggled to grow earnings meaningfully over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 24% shows it's noticeably less attractive on an annualised basis.

In light of this, it's alarming that Biosino Bio-Technology and Science Incorporation's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Final Word

Even after such a strong price drop, Biosino Bio-Technology and Science Incorporation's P/E still exceeds the rest of the market significantly. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Biosino Bio-Technology and Science Incorporation revealed its three-year earnings trends aren't impacting its high P/E anywhere near as much as we would have predicted, given they look worse than current market expectations. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

It is also worth noting that we have found 2 warning signs for Biosino Bio-Technology and Science Incorporation that you need to take into consideration.

If you're unsure about the strength of Biosino Bio-Technology and Science Incorporation's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.