Insufficient Growth At CIFI Ever Sunshine Services Group Limited (HKG:1995) Hampers Share Price

With a price-to-earnings (or "P/E") ratio of 5x CIFI Ever Sunshine Services Group Limited (HKG:1995) may be sending bullish signals at the moment, given that almost half of all companies in Hong Kong have P/E ratios greater than 9x and even P/E's higher than 17x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

CIFI Ever Sunshine Services Group has been struggling lately as its earnings have declined faster than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for CIFI Ever Sunshine Services Group

Keen to find out how analysts think CIFI Ever Sunshine Services Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is CIFI Ever Sunshine Services Group's Growth Trending?

CIFI Ever Sunshine Services Group's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 52%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 13% per annum over the next three years. With the market predicted to deliver 16% growth per year, the company is positioned for a weaker earnings result.

In light of this, it's understandable that CIFI Ever Sunshine Services Group's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From CIFI Ever Sunshine Services Group's P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of CIFI Ever Sunshine Services Group's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - CIFI Ever Sunshine Services Group has 4 warning signs (and 1 which can't be ignored) we think you should know about.

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.

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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.