Some Infinity Logistics and Transport Ventures Limited (HKG:1442) Shareholders Look For Exit As Shares Take 29% Pounding

Unfortunately for some shareholders, the Infinity Logistics and Transport Ventures Limited (HKG:1442) share price has dived 29% 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.

Even after such a large drop in price, Infinity Logistics and Transport Ventures may still be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 13x, since almost half of all companies in Hong Kong have P/E ratios under 8x and even P/E's lower than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

For instance, Infinity Logistics and Transport Ventures' receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Infinity Logistics and Transport Ventures

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Infinity Logistics and Transport Ventures will help you shine a light on its historical performance.

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

There's an inherent assumption that a company should outperform the market for P/E ratios like Infinity Logistics and Transport Ventures' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 33% decrease to the company's bottom line. That put a dampener on the good run it was having over the longer-term as its three-year EPS growth is still a noteworthy 7.4% in total. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 23% shows it's noticeably less attractive on an annualised basis.

With this information, we find it concerning that Infinity Logistics and Transport Ventures is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Bottom Line On Infinity Logistics and Transport Ventures' P/E

Infinity Logistics and Transport Ventures' P/E hasn't come down all the way after its stock plunged. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Infinity Logistics and Transport Ventures revealed its three-year earnings trends aren't impacting its high P/E anywhere near as much as we would have predicted, given they look worse than current market expectations. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

You should always think about risks. Case in point, we've spotted 4 warning signs for Infinity Logistics and Transport Ventures you should be aware of, and 2 of them are a bit unpleasant.

If you're unsure about the strength of Infinity Logistics and Transport Ventures' 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.