Little Excitement Around Lvji Technology Holdings Inc.'s (HKG:1745) Earnings As Shares Take 26% Pounding

Unfortunately for some shareholders, the Lvji Technology Holdings Inc. (HKG:1745) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 73% loss during that time.

Following the heavy fall in price, Lvji Technology Holdings' price-to-earnings (or "P/E") ratio of 2.6x might 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 13x and even P/E's above 25x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

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For instance, Lvji Technology 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. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Lvji Technology Holdings

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Lvji Technology Holdings' earnings, revenue and cash flow.

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

Lvji Technology Holdings' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Retrospectively, the last year delivered a frustrating 42% decrease to the company's bottom line. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Comparing that to the market, which is predicted to deliver 21% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that Lvji Technology Holdings' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Lvji Technology Holdings' P/E

Shares in Lvji Technology Holdings have plummeted and its P/E is now low enough to touch the ground. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Lvji Technology Holdings maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 4 warning signs for Lvji Technology Holdings (2 are a bit unpleasant!) that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.