The Market Doesn't Like What It Sees From SCE Intelligent Commercial Management Holdings Limited's (HKG:606) Earnings Yet As Shares Tumble 29%

SCE Intelligent Commercial Management Holdings Limited (HKG:606) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 81% share price decline.

In spite of the heavy fall in price, SCE Intelligent Commercial Management Holdings' price-to-earnings (or "P/E") ratio of 2.2x might still make it look like a strong buy right now compared to the market in Hong Kong, where around half of the companies have P/E ratios above 10x and even P/E's above 18x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Recent times have been advantageous for SCE Intelligent Commercial Management Holdings as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for SCE Intelligent Commercial Management Holdings

Keen to find out how analysts think SCE Intelligent Commercial Management Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The Low P/E?

There's an inherent assumption that a company should far underperform the market for P/E ratios like SCE Intelligent Commercial Management Holdings' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 28% gain to the company's bottom line. The latest three year period has also seen a 15% overall rise in EPS, aided extensively by its short-term performance. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Looking ahead now, EPS is anticipated to climb by 2.4% per annum during the coming three years according to the sole analyst following the company. Meanwhile, the rest of the market is forecast to expand by 15% each year, which is noticeably more attractive.

With this information, we can see why SCE Intelligent Commercial Management Holdings is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On SCE Intelligent Commercial Management Holdings' P/E

SCE Intelligent Commercial Management Holdings' P/E looks about as weak as its stock price lately. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that SCE Intelligent Commercial Management Holdings 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware SCE Intelligent Commercial Management Holdings is showing 1 warning sign in our investment analysis, you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.