Earnings Not Telling The Story For Tian An Medicare Limited (HKG:383) After Shares Rise 48%

Simply Wall St · 07/02 22:21

The Tian An Medicare Limited (HKG:383) share price has done very well over the last month, posting an excellent gain of 48%. The last 30 days bring the annual gain to a very sharp 65%.

After such a large jump in price, given close to half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") below 11x, you may consider Tian An Medicare as a stock to avoid entirely with its 42.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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Tian An Medicare certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Tian An Medicare

pe-multiple-vs-industry
SEHK:383 Price to Earnings Ratio vs Industry July 2nd 2025
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tian An Medicare will help you shine a light on its historical performance.

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, Tian An Medicare would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 67% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

This is in contrast to the rest of the market, which is expected to grow by 19% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's alarming that Tian An Medicare's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Final Word

The strong share price surge has got Tian An Medicare's P/E rushing to great heights as well. 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.

Our examination of Tian An Medicare revealed its three-year earnings trends aren't impacting its high P/E anywhere near as much as we would have predicted, given they look worse than current market expectations. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Before you settle on your opinion, we've discovered 2 warning signs for Tian An Medicare that you should be aware of.

If you're unsure about the strength of Tian An Medicare's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.