Asia Cement Corporation's (TWSE:1102) Prospects Need A Boost To Lift Shares

With a price-to-earnings (or "P/E") ratio of 13.6x Asia Cement Corporation (TWSE:1102) may be sending bullish signals at the moment, given that almost half of all companies in Taiwan have P/E ratios greater than 22x and even P/E's higher than 39x 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 limited.

Asia Cement could be doing better as it's been growing earnings less than most other companies lately. The P/E is probably low because investors think this lacklustre earnings performance isn't going to get any better. If you still like the company, you'd be hoping earnings don't get any worse and that you could pick up some stock while it's out of favour.

See our latest analysis for Asia Cement

Keen to find out how analysts think Asia Cement's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Asia Cement's Growth Trending?

Asia Cement'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.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. This isn't what shareholders were looking for as it means they've been left with a 40% decline in EPS over the last three years in total. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 0.3% over the next year. Meanwhile, the rest of the market is forecast to expand by 25%, which is noticeably more attractive.

With this information, we can see why Asia Cement is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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.

As we suspected, our examination of Asia Cement's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Asia Cement you should know about.

You might be able to find a better investment than Asia Cement. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.