【ahs ac tune up】Does Zuoli Kechuang Micro-Finance Company Limited’s (HKG:6866) P/E Ratio Signal A Buying Opportunity?
This ahs ac tune uparticle is written for those who want to get better at using price to earnings ratios (P/E ratios). We’ll look at Zuoli Kechuang Micro-Finance Company Limited’s (
HKG:6866
) P/E ratio and reflect on what it tells us about the company’s share price. Based on the last twelve months,
Zuoli Kechuang Micro-Finance’s P/E ratio is 2.33
. That means that at current prices, buyers pay HK$2.33 for every HK$1 in trailing yearly profits.
Check out our latest analysis for Zuoli Kechuang Micro-Finance
How Do I Calculate A Price To Earnings Ratio?
The
formula for price to earnings
is:
Price to Earnings Ratio = Price per Share (in the reporting currency) ÷ Earnings per Share (EPS)
Or for Zuoli Kechuang Micro-Finance:
P/E of 2.33 = CN¥0.31
(Note: this is the share price in the reporting currency, namely, CNY )
÷ CN¥0.13 (Based on the year to June 2018.)
Is A High Price-to-Earnings Ratio Good?
A higher P/E ratio implies that investors pay
a higher price
for the earning power of the business. That is not a good or a bad thing
per se
, but a high P/E does imply buyers are optimistic about the future.
How Growth Rates Impact P/E Ratios
Earnings growth rates have a big influence on P/E ratios. When earnings grow, the ‘E’ increases, over time. That means even if the current P/E is high, it will reduce over time if the share price stays flat. So while a stock may look expensive based on past earnings, it could be cheap based on future earnings.
Zuoli Kechuang Micro-Finance’s earnings per share grew by -7.7% in the last twelve months. And earnings per share have improved by 3.3% annually, over the last three years.
How Does Zuoli Kechuang Micro-Finance’s P/E Ratio Compare To Its Peers?
The P/E ratio essentially measures market expectations of a company. If you look at the image below, you can see Zuoli Kechuang Micro-Finance has a lower P/E than the average (7.5) in the consumer finance industry classification.
SEHK:6866 PE PEG Gauge January 2nd 19
Zuoli Kechuang Micro-Finance’s P/E tells us that market participants think it will not fare as well as its peers in the same industry. Many investors like to buy stocks when the market is pessimistic about their prospects. You should delve deeper. I like to check
if company insiders have been buying or selling
.
A Limitation: P/E Ratios Ignore Debt and Cash In The Bank
Don’t forget that the P/E ratio considers market capitalization. Thus, the metric does not reflect cash or debt held by the company. In theory, a company can lower its future P/E ratio by using cash or debt to invest in growth.
Spending on growth might be good or bad a few years later, but the point is that the P/E ratio does not account for the option (or lack thereof).
Zuoli Kechuang Micro-Finance’s Balance Sheet
Net debt totals a substantial 159% of Zuoli Kechuang Micro-Finance’s market cap. This is a relatively high level of debt, so the stock probably deserves a relatively low P/E ratio. Keep that in mind when comparing it to other companies.
The Bottom Line On Zuoli Kechuang Micro-Finance’s P/E Ratio
Zuoli Kechuang Micro-Finance trades on a P/E ratio of 2.3, which is below the HK market average of 10.4. The meaningful debt load is probably contributing to low expectations, even though it has improved earnings recently.
Investors have an opportunity when market expectations about a stock are wrong. If the reality for a company is not as bad as the P/E ratio indicates, then the share price should increase as the market realizes this. We don’t have analyst forecasts, but you might want to assess
this data-rich visualization
of earnings, revenue and cash flow.
But note:
Zuoli Kechuang Micro-Finance may not be the best stock to buy
. So take a peek at this
free
list of interesting companies with strong recent earnings growth (and a P/E ratio below 20).
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at
.
View comments
-
GBP/USD Daily Forecast – Consolidation Around 1.2400 ContinuesHere is Why Growth Investors Should Buy Brinker International (EAT) NowMeritor to Cut Global Salaried Workers on Coronavirus ScareCalculating The Intrinsic Value Of FFI Holdings Limited (ASX:FFI)The Best Places in Every State To Live on a Fixed IncomeOil Price Fundamental Daily Forecast – OPEC+ to Discuss Production Cut Extension to September 1SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of RTI Surgical Holdings, Inc. - RTIXBitcoin Falls 11% In Bearish TradeThe Zacks Analyst Blog Highlights: Chegg, Tencent, GoDaddy, Fortinet and ServiceNowLive Oak Acquisition Corp. II Announces Pricing of Upsized $220,000,000 Initial Public Offering
下一篇:Galleon Gold Acquires Additional Interest in the Neal Gold Project and Increases Previously Announced Private Placement
- ·Guidewire (GWRE) Q3 Earnings & Revenues Top Estimates, Stock Up
- ·Ferrari (RACE) Q3 Earnings Beat Estimates
- ·CORRECTED-Fed's Evans says U.S. should support workers who lose pay if coronavirus worsens
- ·US warns 7 companies over fraudulent coronavirus claims
- ·Coronavirus spread in Canada is slowing - Public Health Agency
- ·CORRECTED-Fed's Evans says U.S. should support workers who lose pay if coronavirus worsens
- ·Where Do Hedge Funds Stand On FS Bancorp, Inc. (FSBW)?
- ·Fed virus-driven cut may test new approach to inflation
- ·U.S. CDC reports 1,827,425 coronavirus cases
- ·What Is MDU Resources Group's (NYSE:MDU) P/E Ratio After Its Share Price Tanked?
- ·S.Korea's Moon tells Trump he would accept invitation to G7 summit
- ·Are You Looking for a Top Momentum Pick? Why Vapotherm (VAPO) is a Great Choice
- ·Analyzing Brooks Automation's Ex-Dividend Date
- ·aTyr Pharma to Webcast Conference Call Reporting Third Quarter 2020 Financial Results - Management to host conference call and webcast on November 12th at 5:00 pm EST / 2:00 pm PST
- ·Voya: 3Q Earnings Snapshot
- ·Genesco (GCO) Gains But Lags Market: What You Should Know
- ·The Returns At Treatt (LON:TET) Provide Us With Signs Of What's To Come
- ·Pompeo says U.S. considering welcoming Hong Kong people, entrepreneurs
- ·Agios' (AGIO) Phase III Study on Mitapivat Meets Primary Goal
- ·EUR/USD Bullish Break Kick Starts Reversal to 1.13?
- ·Global Hospital Beds Market Report 2020: Market to Reach $5.2 Billion by 2027
- ·Want to land one of today's record-low mortgage rates? Follow these 4 tips
- ·State-backed hackers targeting coronavirus workers, US and UK warn
- ·India gold discounts at widest in five months as prices surge
- ·Should Value Investors Buy Avis Budget Group (CAR) Stock?
- ·Is KB Financial Group, Inc. (KB) A Good Stock To Buy?
- ·StockBeat: No Hiding Place (Except Tesco)
- ·Asian Stocks Plummet Amid Oil Price War
- ·Data Science Salon Launches Three Four-Day Verticalized Virtual Salons
- ·Endurance International (EIGI) Q3 Earnings and Revenues Surpass Estimates
- ·Sientra to Present at the William Blair 40th Annual Growth Stock Conference
- ·More than one-third of small businesses may not last a month: poll
- ·U.S. SEC eases crowdfunding rules for firms due to coronavirus disruption
- ·Are You Looking for a Top Momentum Pick? Why Vapotherm (VAPO) is a Great Choice
- ·H2O Innovation Secures 7 New Projects, Totalling $7.6 M and Received Notice of Cancellation for One Project
- ·Donaldson (DCI) Q1 Earnings & Sales Top Estimates, Decline Y/Y