Shareholders in China Overseas Real Estate Holdings Co., Ltd. (HKG:2669) will be thrilled to see the stock has had a great month, with the share price up 28% and rebounding from previous weakness. Unfortunately, last month’s gains did little to make up for last year’s losses, with the stock still down 15% during that time.
Potentially avoid China Overseas Property Holdings at 12.7x given that around half of Hong Kong companies have price-to-earnings ratios below 9x following a solid rebound in share prices You might think of it as a brand. P.E.R. However, it would be unwise to take the P/E ratio at face value, as there may be an explanation as to why it is so high.
China Overseas Real Estate Holdings has certainly been doing a good job lately, growing profits faster than most other companies. There are many expectations that the company’s strong performance will continue, and the P/E ratio appears to be rising. If you don’t hope so, you will end up paying a very high price for no particular reason.
Check out our latest analysis for China Overseas Real Estate Holdings.
SEHK:2669 Price/Earnings Ratio vs. Industry Oct 10, 2024 To see what analysts are predicting going forward, check out this free report on China Overseas Real Estate Holdings.
Does growth equate to a high P/E ratio?
There is an inherent assumption that for a P/E ratio like China Overseas Real Estate Holdings’ to be considered reasonable, a company’s P/E ratio must be above the market.
First, looking back at the past, we can see that the company grew its earnings per share by an impressive 16% in the last year. Its recent strong performance means it was able to grow its EPS by a total of 114% over the past three years. So it’s safe to say that recent earnings growth has been great for the company.
Looking to the future, analysts covering the company estimate that revenue should grow 12% annually over the next three years. With the market expected to grow at 12% annually, the company is well positioned to expect comparable returns.
With this information, we can find out interestingly that China Overseas Real Estate Holdings is trading at a high P/E compared to the market. Apparently, many of the company’s investors are more bullish than analysts are suggesting and aren’t willing to exit the stock any time soon. These shareholders could be bracing themselves for disappointment if the P/E declines to a level that is in line with growth prospects.
Important points
China Overseas Real Estate Holdings stocks are receiving a push in the right direction, but their P/E ratio is also rising. It has been argued that the price-to-earnings ratio is a poor measure of value in certain industries, but can be a powerful indicator of business confidence.
After examining analyst forecasts for China Overseas Real Estate Holdings, we found that the company’s market consensus earnings outlook has not had as much of an impact on the company’s high P/E ratio as we expected. Looking at the average earnings outlook with market-like growth, we think there is a risk that the stock price will fall, and the high P/E ratio will decline. Unless this situation improves, it is difficult to accept this price as reasonable.
There are many other important risk factors on a company’s balance sheet. Through our free balance sheet analysis of China Overseas Real Estate Holdings, you can assess many of the key risks with six simple checks.
If you aren’t sure about the strength of China Overseas Real Estate Holdings’ business, why not explore our interactive stock list with solid business fundamentals for other companies you may have missed?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
