Not many would find it worth noting that Greentech Technology International Limited's (HKG:195) price-to-earnings ratio (or “P/E”) is 8.6x, when the average price-to-earnings ratio in Hong Kong is around 9x. However, it's unwise to ignore P/Es without an explanation, as they could be leading investors to ignore clear opportunities or costly mistakes.
As an example, Greentech Technology International's earnings have deteriorated over the past year, which is hardly ideal. Many may be expecting the company to overcome its disappointing earnings performance over the next few years and prevent a decline in its price-to-earnings multiple. If not, existing shareholders may be feeling a bit nervous about the viability of the share price.
View our latest analysis for Greentech Technology International
SEHK:195 Price Earnings Ratio vs. Industry 27 August 2024 Want the full picture of the company's earnings, revenue and cash flow? Our free report on Greentech Technology International will help shed light on the company's past performance.
What are the growth trends of Greentech Technology International?
There is essentially an assumption that for a P/E ratio like Greentech Technology International's to be considered reasonable, a company's P/E ratio must be in line with the market.
Looking back at last year's revenue, the company's profits unfortunately fell by 68%. Unfortunately, this figure puts it back to where it started three years ago, and EPS growth overall has been virtually zero in that time. So shareholders probably weren't too happy with the shaky medium term growth rate.
Compared to the market, which is expected to grow 21% over the next 12 months, the company's momentum is weak based on its recent mid-year annual earnings results.
With this in mind, it's interesting to see that Greentech Technology International's P/E is in line with the majority of other companies. It appears that many of the company's investors are not as bearish as recent developments would suggest, and are not looking to exit the stock at the moment. This price will be hard to sustain, as the share price will likely eventually fall if recent earnings trends continue.
Final Words
The power of price-to-earnings ratios is not primarily as a valuation tool, but rather as a gauge of current investor sentiment and future expectations.
Research from Greentech Technology International reveals that the company's three-year earnings trend is worse than current market expectations, which is not impacting the P/E as much as expected. At this point, we are concerned about the P/E as this earnings performance is unlikely to support more positive sentiment over the longer term. Unless recent medium-term conditions improve, it is difficult to accept these prices as reasonable.
You should always think about the risks, as an example, we've spotted 2 warning signs for Greentech Technology International you should be aware of.
You might find a better investment than Greentech Technology International. If you'd like to pick some potential companies, check out this free list of interesting companies with low P/E ratios (but which have proven they can grow earnings).
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
