Investors Give Flat Glass Group Co., Ltd. (HKG:6865) Shares A 29% Hiding

To the annoyance of some shareholders, Flat Glass Group Co., Ltd. (HKG:6865) shares are down a considerable 29% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Flat Glass Group's P/E ratio of 8.3x, since the median price-to-earnings (or "P/E") ratio in Hong Kong is also close to 9x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been advantageous for Flat Glass Group as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Flat Glass Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Flat Glass Group.

Does Growth Match The P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like Flat Glass Group's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 27% last year. As a result, it also grew EPS by 14% in total over the last three years. 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 21% per 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.

In light of this, it's curious that Flat Glass Group's P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Flat Glass Group's P/E

Flat Glass Group's plummeting stock price has brought its P/E right back to the rest of the market. 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.

Our examination of Flat Glass Group's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you take the next step, you should know about the 3 warning signs for Flat Glass Group (1 is concerning!) that we have uncovered.

If you're unsure about the strength of Flat Glass Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com