C&D International Investment Group Limited's (HKG:1908) Shares Bounce 32% But Its Business Still Trails The Market

The C&D International Investment Group Limited (HKG:1908) share price has done very well over the last month, posting an excellent gain of 32%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

Although its price has surged higher, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 10x, you may still consider C&D International Investment Group as an attractive investment with its 7.1x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

C&D International Investment Group hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for C&D International Investment Group

Keen to find out how analysts think C&D International Investment Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is C&D International Investment Group's Growth Trending?

In order to justify its P/E ratio, C&D International Investment Group would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 8.0% decrease to the company's bottom line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 20% overall rise in EPS. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.

Turning to the outlook, the next three years should generate growth of 7.3% each year as estimated by the eight analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 16% per annum, which is noticeably more attractive.

In light of this, it's understandable that C&D International Investment Group's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From C&D International Investment Group's P/E?

Despite C&D International Investment Group's shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that C&D International Investment Group maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for C&D International Investment Group you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.