What You Can Learn From Yuexiu Property Company Limited's (HKG:123) P/E

Explore Yuexiu Property's Fair Values from the Community and select yours

When close to half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") below 12x, you may consider Yuexiu Property Company Limited (HKG:123) as a stock to potentially avoid with its 17.8x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Yuexiu Property could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

See our latest analysis for Yuexiu Property

Want the full picture on analyst estimates for the company? Then our free report on Yuexiu Property will help you uncover what's on the horizon.

Does Growth Match The High P/E?

In order to justify its P/E ratio, Yuexiu Property would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered a frustrating 70% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 78% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 24% each year as estimated by the analysts watching the company. That's shaping up to be materially higher than the 15% per year growth forecast for the broader market.

In light of this, it's understandable that Yuexiu Property's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Yuexiu Property's P/E

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Yuexiu Property maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Yuexiu Property you should be aware of.

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 low P/E.

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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.