Sunshine Global Circuits Co.,Ltd. (SZSE:300739) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 22% share price drop.
Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Sunshine Global CircuitsLtd's P/E ratio of 29.3x, since the median price-to-earnings (or "P/E") ratio in China is also close to 29x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
For instance, Sunshine Global CircuitsLtd's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is moderate because investors think the company might still do enough to be in line with the broader market in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
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Does Growth Match The P/E?
In order to justify its P/E ratio, Sunshine Global CircuitsLtd would need to produce growth that's similar to the market.
Retrospectively, the last year delivered a frustrating 35% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 24% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Comparing that to the market, which is predicted to deliver 42% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.
With this information, we find it concerning that Sunshine Global CircuitsLtd is trading at a fairly similar P/E to the market. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh on the share price eventually.
The Final Word
Sunshine Global CircuitsLtd's plummeting stock price has brought its P/E right back to the rest of the market. 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.
We've established that Sunshine Global CircuitsLtd currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the moderate P/E lower. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
You always need to take note of risks, for example - Sunshine Global CircuitsLtd has 2 warning signs we think you should be aware of.
If these risks are making you reconsider your opinion on Sunshine Global CircuitsLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.
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有了这些信息,我们发现Sunshine Global CircuitsLtd的交易市盈率与市场相当相似。看来大多数投资者都忽视了最近的糟糕增长率,并希望公司的业务前景有所好转。只有最大胆的人才会假设这些价格是可持续的,因为近期收益趋势的延续最终可能会压制股价。
最后一句话
Sunshine Global CircuitsLtd的股价暴跌使其市盈率直接回到了其他市场。通常,我们的倾向是将市盈率的使用限制在确定市场对公司整体健康状况的看法上。
我们已经确定,Sunshine Global CircuitsLtd目前的市盈率高于预期,因为其最近的收益在中期内有所下降。当我们看到收益倒退且表现低于市场预期时,我们怀疑股价有下跌的风险,从而使温和的市盈率走低。如果最近的中期收益趋势持续下去,将使股东的投资面临风险,潜在投资者面临支付不必要的溢价的危险。
你需要时刻注意风险,例如——Sunshine Global CircuitsLtd有两个我们认为你应该注意的警告标志。
如果这些风险让你重新考虑你对Sunshine Global CircuitsLtd的看法,请浏览我们的高质量股票互动清单,了解还有什么。