Tianjin Construction Development Group Co., Ltd. (HKG:2515) Stock Catapults 43% Though Its Price And Business Still Lag The Market

The Tianjin Construction Development Group Co., Ltd. (HKG:2515) share price has done very well over the last month, posting an excellent gain of 43%. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 54% share price drop in the last twelve months.

Even after such a large jump in price, Tianjin Construction Development Group may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6x, since almost half of all companies in Hong Kong have P/E ratios greater than 12x and even P/E's higher than 23x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

We've discovered 3 warning signs about Tianjin Construction Development Group. View them for free.

For example, consider that Tianjin Construction Development Group's financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

See our latest analysis for Tianjin Construction Development Group

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Tianjin Construction Development Group's earnings, revenue and cash flow.

Is There Any Growth For Tianjin Construction Development Group?

Tianjin Construction Development Group's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 59%. As a result, earnings from three years ago have also fallen 64% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

In contrast to the company, the rest of the market is expected to grow by 18% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

With this information, we are not surprised that Tianjin Construction Development Group 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 Tianjin Construction Development Group's P/E?

Tianjin Construction Development Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Tianjin Construction Development Group 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Tianjin Construction Development Group is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning.

You might be able to find a better investment than Tianjin Construction Development Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.