Market Participants Recognise Country Garden Services Holdings Company Limited's (HKG:6098) Earnings

When close to half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") below 9x, you may consider Country Garden Services Holdings Company Limited (HKG:6098) as a stock to potentially avoid with its 11.5x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

With earnings that are retreating more than the market's of late, Country Garden Services Holdings has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Country Garden Services Holdings

Keen to find out how analysts think Country Garden Services 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 High P/E?

The only time you'd be truly comfortable seeing a P/E as high as Country Garden Services Holdings' is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered a frustrating 62% 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 36% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 37% each year during the coming three years according to the analysts following the company. With the market only predicted to deliver 16% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Country Garden Services Holdings is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Country Garden Services Holdings' 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.

We've established that Country Garden Services Holdings 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Country Garden Services Holdings that you should be aware of.

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.