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There's Reason For Concern Over Pan Asia Environmental Protection Group Limited's (HKG:556) Massive 37% Price Jump

Simply Wall St · 1d ago

The Pan Asia Environmental Protection Group Limited (HKG:556) share price has done very well over the last month, posting an excellent gain of 37%. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 3.6% over the last year.

Following the firm bounce in price, Pan Asia Environmental Protection Group's price-to-earnings (or "P/E") ratio of 31.1x might make it look like a strong sell right now compared to the market in Hong Kong, where around half of the companies have P/E ratios below 12x and even P/E's below 7x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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With earnings growth that's exceedingly strong of late, Pan Asia Environmental Protection Group has been doing very well. 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Pan Asia Environmental Protection Group

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SEHK:556 Price to Earnings Ratio vs Industry December 15th 2025
Although there are no analyst estimates available for Pan Asia Environmental Protection Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Pan Asia Environmental Protection Group's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Pan Asia Environmental Protection Group's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 148% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 21% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's alarming that Pan Asia Environmental Protection Group's P/E sits above the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Key Takeaway

Pan Asia Environmental Protection Group's P/E is flying high just like its stock has during the last month. 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 Pan Asia Environmental Protection Group currently trades on a much higher than expected P/E since its recent three-year growth is lower than the wider market forecast. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Plus, you should also learn about these 2 warning signs we've spotted with Pan Asia Environmental Protection Group.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).