There's No Escaping QPL International Holdings Limited's (HKG:243) Muted Earnings Despite A 40% Share Price Rise

Those holding QPL International Holdings Limited (HKG:243) shares would be relieved that the share price has rebounded 40% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.5% in the last twelve months.

Although its price has surged higher, QPL International Holdings may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 4.8x, since almost half of all companies in Hong Kong have P/E ratios greater than 9x and even P/E's higher than 20x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

For instance, QPL International Holdings' receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

View our latest analysis for QPL International Holdings

Although there are no analyst estimates available for QPL International Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For QPL International Holdings?

In order to justify its P/E ratio, QPL International Holdings would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's bottom line. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that to the market, which is predicted to deliver 17% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why QPL International Holdings is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

What We Can Learn From QPL International Holdings' P/E?

The latest share price surge wasn't enough to lift QPL International Holdings' P/E close to the market median. 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 QPL International Holdings maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 4 warning signs for QPL International Holdings (1 is a bit concerning!) that you should be aware of before investing here.

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 P/E ratio below 20x).

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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.