Man Shing Global Holdings Limited (HKG:8309) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.
In spite of the firm bounce in price, given close to half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 9x, you may still consider Man Shing Global Holdings as a highly attractive investment with its 4x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.
Recent times have been quite advantageous for Man Shing Global Holdings as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
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What Are Growth Metrics Telling Us About The Low P/E?
In order to justify its P/E ratio, Man Shing Global Holdings would need to produce anemic growth that's substantially trailing the market.
Retrospectively, the last year delivered an exceptional 60% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
This is in contrast to the rest of the market, which is expected to grow by 15% over the next year, materially higher than the company's recent medium-term annualised growth rates.
With this information, we can see why Man Shing Global Holdings is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.
The Key Takeaway
Shares in Man Shing Global Holdings are going to need a lot more upward momentum to get the company's P/E out of its slump. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that Man Shing Global Holdings maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
It is also worth noting that we have found 1 warning sign for Man Shing Global Holdings that you need to take into consideration.
Of course, you might also be able to find a better stock than Man Shing Global Holdings. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.
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堅調な価格反発にもかかわらず、香港の半数近くの企業の株価収益率(または「P/E」)が9倍を超えていることを考えると、Man Sing Global Holdingsは株価収益率が4倍の非常に魅力的な投資先と考えることができます。しかし、株価収益率がかなり低いのには理由があり、それが正当かどうかを判断するにはさらなる調査が必要です。
Man Sing Global Holdingsの株式は、会社の株価収益率を低迷から脱却させるためには、もっと上昇の勢いが必要になるでしょう。通常、投資判断を下す際には、株価収益率を読みすぎないように注意しますが、他の市場参加者が会社についてどう思っているかについて多くのことが明らかになります。
Man Sing Global Holdingsは、最近の3年間の成長率が予想通り市場全体の予測を下回っているという弱さから、低い株価収益率を維持していることを確認しました。この段階では、投資家は、収益の改善の可能性は、より高い株価収益率を正当化するほど大きくないと感じています。最近の中期的な状況が改善しない限り、これらの水準付近の株価に対する障壁となり続けるでしょう。