Keen Ocean International Holding Limited (HKG:8070) Stock Rockets 29% But Many Are Still Ignoring The Company

Keen Ocean International Holding Limited (HKG:8070) shareholders have had their patience rewarded with a 29% share price jump in the last month. The annual gain comes to 103% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 13x, you may still consider Keen Ocean International Holding as an attractive investment with its 8.9x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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As an illustration, earnings have deteriorated at Keen Ocean International Holding over the last year, which is not ideal at all. 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.

See our latest analysis for Keen Ocean International Holding

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 Keen Ocean International Holding's earnings, revenue and cash flow.

Is There Any Growth For Keen Ocean International Holding?

Keen Ocean International Holding's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 6.8% decrease to the company's bottom line. Even so, admirably EPS has lifted 70% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 20% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Keen Ocean International Holding's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On Keen Ocean International Holding's P/E

The latest share price surge wasn't enough to lift Keen Ocean International Holding's P/E close to the market median. 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 Keen Ocean International Holding revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Before you take the next step, you should know about the 1 warning sign for Keen Ocean International Holding that we have uncovered.

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

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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.