Saturday, June 15, 2024

Sinosteel Engineering & Technology Co., Ltd.’s (SZSE:000928) Low P/E No Reason For Excitement

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With a price-to-earnings (or “P/E”) ratio of 12x Sinosteel Engineering & Technology Co., Ltd. (SZSE:000928) may be sending very bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 32x and even P/E’s higher than 60x are not unusual. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Recent earnings growth for Sinosteel Engineering & Technology has been in line with the market. It might be that many expect the mediocre earnings performance to degrade, which has repressed the P/E. If you like the company, you’d be hoping this isn’t the case so that you could pick up some stock while it’s out of favour.

See our latest analysis for Sinosteel Engineering & Technology

SZSE:000928 Price to Earnings Ratio vs Industry May 27th 2024

If you’d like to see what analysts are forecasting going forward, you should check out our free report on Sinosteel Engineering & Technology.

Is There Any Growth For Sinosteel Engineering & Technology?

Sinosteel Engineering & Technology’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. This isn’t what shareholders were looking for as it means they’ve been left with a 6.0% decline in EPS over the last three years in total. Therefore, it’s fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 11% each year during the coming three years according to the seven analysts following the company. That’s shaping up to be materially lower than the 26% each year growth forecast for the broader market.

With this information, we can see why Sinosteel Engineering & Technology 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 Key Takeaway

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.

As we suspected, our examination of Sinosteel Engineering & Technology’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.

Before you settle on your opinion, we’ve discovered 3 warning signs for Sinosteel Engineering & Technology (1 is concerning!) that you should be aware of.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Sinosteel Engineering & Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.

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