Uni-President China Holdings Ltd (HKG:220) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 29% in the last twelve months.
Since its price has surged higher, Uni-President China Holdings' price-to-earnings (or "P/E") ratio of 13.7x might make it look like a strong sell right now compared to the market in Hong Kong, where around half of the companies have P/E ratios below 8x and even P/E's below 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
With its earnings growth in positive territory compared to the declining earnings of most other companies, Uni-President China Holdings has been doing quite well of late. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors' willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Want the full picture on analyst estimates for the company? Then our free report on Uni-President China Holdings will help you uncover what's on the horizon.
Does Growth Match The High P/E?
Uni-President China Holdings' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.
Retrospectively, the last year delivered an exceptional 36% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
Looking ahead now, EPS is anticipated to climb by 5.0% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to expand by 15% each year, which is noticeably more attractive.
With this information, we find it concerning that Uni-President China Holdings is trading at a P/E higher than the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.
The Key Takeaway
The strong share price surge has got Uni-President China Holdings' P/E rushing to great heights as well. 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.
Our examination of Uni-President China Holdings' analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Uni-President China Holdings, and understanding should be part of your investment process.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Uni-President China Holdings Ltd(HKG: 220)的股東們會很高興看到股價經歷了一個不錯的月份,漲幅爲27%,並從先前的疲軟中恢復過來。並非所有股東都會感到歡欣鼓舞,因爲股價在過去十二個月中仍然下跌了令人失望的29%。
由於其價格飆升,Uni-President China Holdings的市盈率(或 “市盈率”)爲13.7倍,與香港市場相比,目前看上去像是強勁的拋售。在香港,約有一半公司的市盈率低於8倍,甚至市盈率低於4倍也很常見。儘管如此,我們需要更深入地挖掘,以確定市盈率大幅上漲是否有合理的基礎。
與大多數其他公司的收益下降相比,Uni-President China Holdings的收益增長處於正值區間,最近表現良好。看來許多人預計該公司將繼續克服更廣泛的市場逆境,這增加了投資者購買股票的意願。你真的希望如此,否則你會無緣無故地付出相當大的代價。
想全面了解分析師對公司的估計嗎?然後,我們關於統一中國控股的免費報告將幫助您發現即將發生的事情。
增長與高市盈率相匹配嗎?
Uni-President China Holdings的市盈率對於一家預計將實現非常強勁的增長,更重要的是,其表現要好於市場的公司來說是典型的。