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Nine Dragons Paper (Holdings) Limited's (HKG:2689) Popularity With Investors Is Clear

Simply Wall St · 01/05 07:38

When close to half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") below 12x, you may consider Nine Dragons Paper (Holdings) Limited (HKG:2689) as a stock to potentially avoid with its 14.3x 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 as high as it is.

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With earnings growth that's superior to most other companies of late, Nine Dragons Paper (Holdings) has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Nine Dragons Paper (Holdings)

pe-multiple-vs-industry
SEHK:2689 Price to Earnings Ratio vs Industry January 5th 2026
Keen to find out how analysts think Nine Dragons Paper (Holdings)'s future stacks up against the industry? In that case, our free report is a great place to start.

How Is Nine Dragons Paper (Holdings)'s Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like Nine Dragons Paper (Holdings)'s to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 135% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 46% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 29% each year as estimated by the eleven analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 13% per annum, which is noticeably less attractive.

In light of this, it's understandable that Nine Dragons Paper (Holdings)'s P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Nine Dragons Paper (Holdings)'s P/E

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 Nine Dragons Paper (Holdings) maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Nine Dragons Paper (Holdings) is showing 1 warning sign in our investment analysis, you should know about.

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