Citic Pacific Special Steel Group Co., Ltd's (SZSE:000708) Shares Lagging The Market But So Is The Business

With a price-to-earnings (or "P/E") ratio of 9.7x Citic Pacific Special Steel Group Co., Ltd (SZSE:000708) may be sending very bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 27x and even P/E's higher than 50x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Citic Pacific Special Steel Group has been struggling lately as its earnings have declined faster than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.