When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 33x, you may consider Ningbo Zhoushan Port Company Limited (SHSE:601018) as a highly attractive investment with its 14.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Earnings have risen firmly for Ningbo Zhoushan Port recently, which is pleasing to see. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

How Is Ningbo Zhoushan Port's Growth Trending?

Ningbo Zhoushan Port'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.

If we review the last year of earnings growth, the company posted a worthy increase of 7.9%. Still, lamentably EPS has fallen 11% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 39% shows it's an unpleasant look.

With this information, we are not surprised that Ningbo Zhoushan Port is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

What We Can Learn From Ningbo Zhoushan Port's P/E?

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.

We've established that Ningbo Zhoushan Port maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Ningbo Zhoushan Port.

If these risks are making you reconsider your opinion on Ningbo Zhoushan Port, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.