China Resources Mixc Lifestyle Services Limited (HKG:1209) shareholders have seen their patience rewarded with a 30% share price increase over the last month. Despite the recent rally, the annual share price return of 6.8% isn’t all that surprising.
China Resources Mixk Lifestyle Services has seen a strong rebound in its share price, given that nearly half of Hong Kong companies have a price-to-earnings ratio (P/E) of less than 9 times. From now on, you might consider it a stock to avoid completely. PER is 19 times. However, there may be a reason why the P/E ratio is so high, and further research is needed to determine if it’s justified.
Things have been favorable for China Resources Mixk Lifestyle Services recently, with profits growing faster than most other companies. The P/E ratio is high because investors believe this strong performance will continue. 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 Resources Mixc Lifestyle Services.
Find out what analysts are predicting for the future by checking out this free report on China Resources Mixk Lifestyle Services.
What do growth metrics tell us about a high P/E ratio?
There is an inherent assumption that a company like China Resources Mixk Lifestyle Services has a P/E ratio that is well above the market and is considered reasonable.
Looking back at last year’s earnings growth, the company posted an impressive 33% increase. Pleasingly, the growth over the last twelve months also meant that EPS increased by a total of 134% compared to three years ago. Therefore, shareholders likely welcomed these medium-term earnings growth rates.
Looking ahead, analysts who follow the company say that EPS is expected to increase by 13% per year over the next three years. This is becoming similar to the 13% annual growth forecast for the broader market.
With this in mind, it’s interesting to see that China Resources Mixk Lifestyle Services’ P/E is higher than most other companies. Most investors seem to be willing to pay for exposure to the stock, ignoring fairly average growth expectations. These shareholders could be bracing themselves for disappointment if the P/E declines to a level that is in line with growth prospects.
China Resources Mixke Lifestyle Services P/E Conclusion
China Resources Mixk Lifestyle Services’ P/E ratio has been on the rise, as has the stock’s price over the last month. 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.
A look at analyst forecasts for China Resources Mixk Lifestyle Services reveals that the company’s market-aligned earnings outlook isn’t having as much of an impact on the company’s high P/E ratio as we expected. It became. At this point, we’re uncomfortable with the stock’s relatively high price, as expected future earnings are unlikely to support such positive sentiment over the long term. This puts shareholders’ investments at risk and puts potential investors at risk of paying an unnecessary premium.
A company’s balance sheet is another important area of risk analysis. Check out our free balance sheet analysis for China Resources Mixi Lifestyle Services, including 6 quick checks on some of these important factors.
Of course, you might find better stocks than China Resources Mixc Lifestyle Services. So we recommend taking a look at this free collection of other companies that have reasonable P/E ratios and are growing earnings strongly.
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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.
