With C&D Property Management Group Co. Limited (HKG:2156) It Looks Like You'll Get What You Pay For

With a price-to-earnings (or "P/E") ratio of 15.9x C&D Property Management Group Co. Limited (HKG:2156) may be sending very bearish signals at the moment, given that almost half of all companies in Hong Kong have P/E ratios under 8x and even P/E's lower than 4x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

C&D Property Management Group certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for C&D Property Management Group

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

How Is C&D Property Management Group's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as C&D Property Management Group's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 30% last year. The strong recent performance means it was also able to grow EPS by 150% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 20% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 16% per year, which is noticeably less attractive.

In light of this, it's understandable that C&D Property Management Group's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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 Property Management Group maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware C&D Property Management Group is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of C&D Property Management Group'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.