In This Article:
This article is for investors who would like to improve their understanding of price to earnings ratios (P/E ratios). We'll show how you can use COSCO SHIPPING Holdings Co., Ltd.'s (HKG:1919) P/E ratio to inform your assessment of the investment opportunity. What is COSCO SHIPPING Holdings's P/E ratio? Well, based on the last twelve months it is 13.63. That is equivalent to an earnings yield of about 7.3%.
View our latest analysis for COSCO SHIPPING Holdings
How Do I Calculate COSCO SHIPPING Holdings's Price To Earnings Ratio?
The formula for P/E is:
Price to Earnings Ratio = Share Price (in reporting currency) ÷ Earnings per Share (EPS)
Or for COSCO SHIPPING Holdings:
P/E of 13.63 = HK$2.84 (Note: this is the share price in the reporting currency, namely, CNY ) ÷ HK$0.21 (Based on the year to September 2019.)
Is A High Price-to-Earnings Ratio Good?
The higher the P/E ratio, the higher the price tag of a business, relative to its trailing earnings. That isn't a good or a bad thing on its own, but a high P/E means that buyers have a higher opinion of the business's prospects, relative to stocks with a lower P/E.
Does COSCO SHIPPING Holdings Have A Relatively High Or Low P/E For Its Industry?
The P/E ratio indicates whether the market has higher or lower expectations of a company. As you can see below COSCO SHIPPING Holdings has a P/E ratio that is fairly close for the average for the shipping industry, which is 13.4.
COSCO SHIPPING Holdings's P/E tells us that market participants think its prospects are roughly in line with its industry. So if COSCO SHIPPING Holdings actually outperforms its peers going forward, that should be a positive for the share price. Checking factors such as director buying and selling. could help you form your own view on if that will happen.
How Growth Rates Impact P/E Ratios
Generally speaking the rate of earnings growth has a profound impact on a company's P/E multiple. If earnings are growing quickly, then the 'E' in the equation will increase faster than it would otherwise. Therefore, even if you pay a high multiple of earnings now, that multiple will become lower in the future. A lower P/E should indicate the stock is cheap relative to others -- and that may attract buyers.
COSCO SHIPPING Holdings's earnings made like a rocket, taking off 183% last year.
Remember: P/E Ratios Don't Consider The Balance Sheet
Don't forget that the P/E ratio considers market capitalization. That means it doesn't take debt or cash into account. The exact same company would hypothetically deserve a higher P/E ratio if it had a strong balance sheet, than if it had a weak one with lots of debt, because a cashed up company can spend on growth.