How Does COSCO Shipping International (Singapore)'s (SGX:F83) P/E Compare To Its Industry, After Its Big Share Price Gain?
Those holding COSCO Shipping International (Singapore) (SGX:F83) shares must be pleased that the share price has rebounded 31% in the last thirty days. But unfortunately, the stock is still down by 27% over a quarter. But shareholders may not all be feeling jubilant, since the share price is still down 34% in the last year.
Assuming no other changes, a sharply higher share price makes a stock less attractive to potential buyers. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. The implication here is that deep value investors might steer clear when expectations of a company are too high. One way to gauge market expectations of a stock is to look at its Price to Earnings Ratio (PE Ratio). A high P/E implies that investors have high expectations of what a company can achieve compared to a company with a low P/E ratio.
Check out our latest analysis for COSCO Shipping International (Singapore)
How Does COSCO Shipping International (Singapore)'s P/E Ratio Compare To Its Peers?
We can tell from its P/E ratio of 68.29 that there is some investor optimism about COSCO Shipping International (Singapore). You can see in the image below that the average P/E (13.7) for companies in the logistics industry is a lot lower than COSCO Shipping International (Singapore)'s P/E.
COSCO Shipping International (Singapore)'s P/E tells us that market participants think the company will perform better than its industry peers, going forward. Shareholders are clearly optimistic, but the future is always uncertain. So further research is always essential. I often monitor director buying and selling.
How Growth Rates Impact P/E Ratios
If earnings fall then in the future the 'E' will be lower. Therefore, even if you pay a low multiple of earnings now, that multiple will become higher in the future. A higher P/E should indicate the stock is expensive relative to others -- and that may encourage shareholders to sell.
COSCO Shipping International (Singapore) saw earnings per share decrease by 43% last year. And EPS is down 19% a year, over the last 5 years. This might lead to muted expectations.
Remember: P/E Ratios Don't Consider The Balance Sheet
The 'Price' in P/E reflects the market capitalization of the company. Thus, the metric does not reflect cash or debt held by the company. Theoretically, a business can improve its earnings (and produce a lower P/E in the future) by investing in growth. That means taking on debt (or spending its cash).
While growth expenditure doesn't always pay off, the point is that it is a good option to have; but one that the P/E ratio ignores.
Is Debt Impacting COSCO Shipping International (Singapore)'s P/E?
COSCO Shipping International (Singapore)'s net debt equates to 30% of its market capitalization. You'd want to be aware of this fact, but it doesn't bother us.
The Verdict On COSCO Shipping International (Singapore)'s P/E Ratio
COSCO Shipping International (Singapore)'s P/E is 68.3 which suggests the market is more focussed on the future opportunity rather than the current level of earnings. With some debt but no EPS growth last year, the market has high expectations of future profits. What we know for sure is that investors have become much more excited about COSCO Shipping International (Singapore) recently, since they have pushed its P/E ratio from 52.2 to 68.3 over the last month. If you like to buy stocks that have recently impressed the market, then this one might be a candidate; but if you prefer to invest when there is 'blood in the streets', then you may feel the opportunity has passed.
When the market is wrong about a stock, it gives savvy investors an opportunity. If the reality for a company is better than it expects, you can make money by buying and holding for the long term. Although we don't have analyst forecasts shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Of course you might be able to find a better stock than COSCO Shipping International (Singapore). So you may wish to see this free collection of other companies that have grown earnings strongly.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
