Slammed 29% Keen Ocean International Holding Limited (HKG:8070) Screens Well Here But There Might Be A Catch

The Keen Ocean International Holding Limited (HKG:8070) share price has fared very poorly over the last month, falling by a substantial 29%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 23% share price drop.

In spite of the heavy fall in price, Keen Ocean International Holding may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 2.1x, since almost half of all companies in Hong Kong have P/E ratios greater than 9x and even P/E's higher than 18x 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 so limited.

It looks like earnings growth has deserted Keen Ocean International Holding recently, which is not something to boast about. One possibility is that the P/E is low because investors think this benign earnings growth rate will likely underperform the broader market in the near future. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

See our latest analysis for Keen Ocean International Holding

Although there are no analyst estimates available for Keen Ocean International Holding, 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 Keen Ocean International Holding?

Keen Ocean International Holding's 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 virtually the same number to the company's bottom line as the year before. Still, the latest three year period has seen an excellent 1,329% overall rise in EPS, in spite of its uninspiring short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 19% shows it's noticeably more attractive 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 looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Keen Ocean International Holding's P/E looks about as weak as its stock price lately. 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 anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Keen Ocean International Holding 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.