Positive Sentiment Still Eludes Gogox Holdings Limited (HKG:2246) Following 27% Share Price Slump

Unfortunately for some shareholders, the Gogox Holdings Limited (HKG:2246) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 86% loss during that time.

Even after such a large drop in price, Gogox Holdings may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of -0.6x, since almost half of all companies in Hong Kong have P/E ratios greater than 10x and even P/E's higher than 21x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Gogox Holdings has been struggling lately as its earnings have declined faster than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Gogox Holdings

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

Does Growth Match The Low P/E?

Gogox 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.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 11%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 88% as estimated by the only analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 25%, which is noticeably less attractive.

With this information, we find it odd that Gogox Holdings is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Gogox Holdings' P/E

Having almost fallen off a cliff, Gogox Holdings' share price has pulled its P/E way down as well. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Gogox Holdings' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near 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 significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 2 warning signs for Gogox Holdings (1 is significant!) that we have uncovered.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.