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Improved Earnings Required Before China Conch Venture Holdings Limited (HKG:586) Stock's 26% Jump Looks Justified

Simply Wall St · 06/15 00:16

The China Conch Venture Holdings Limited (HKG:586) share price has done very well over the last month, posting an excellent gain of 26%. The last 30 days bring the annual gain to a very sharp 55%.

In spite of the firm bounce in price, China Conch Venture Holdings' price-to-earnings (or "P/E") ratio of 7.8x might still make it look like a buy right now compared to the market in Hong Kong, where around half of the companies have P/E ratios above 12x and even P/E's above 24x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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China Conch Venture Holdings hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for China Conch Venture Holdings

pe-multiple-vs-industry
SEHK:586 Price to Earnings Ratio vs Industry June 15th 2025
Want the full picture on analyst estimates for the company? Then our free report on China Conch Venture Holdings will help you uncover what's on the horizon.

Is There Any Growth For China Conch Venture Holdings?

In order to justify its P/E ratio, China Conch Venture Holdings would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 14%. This means it has also seen a slide in earnings over the longer-term as EPS is down 70% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 9.7% each year over the next three years. That's shaping up to be materially lower than the 14% per year growth forecast for the broader market.

With this information, we can see why China Conch Venture Holdings is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The latest share price surge wasn't enough to lift China Conch Venture Holdings' P/E close to the market median. 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 China Conch Venture Holdings maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 2 warning signs for China Conch Venture Holdings (1 can't be ignored!) that you should be aware of.

Of course, you might also be able to find a better stock than China Conch Venture Holdings. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.