Those holding F8 Enterprises (Holdings) Group (HKG:8347) shares must be pleased that the share price has rebounded 35% in the last thirty days. But unfortunately, the stock is still down by 16% over a quarter. However, that doesn't change the fact that longer term shareholders might have been mercilessly wrecked by the 63% share price decline throughout the year.

All else being equal, a sharp share price increase should make a stock less attractive to potential investors. In the long term, share prices tend to follow earnings per share, but in the short term prices bounce around in response to short term factors (which are not always obvious). So some would prefer to hold off buying when there is a lot of optimism towards a stock. Perhaps the simplest way to get a read on investors' expectations of a business is to look at its Price to Earnings Ratio (PE Ratio). A high P/E ratio means that investors have a high expectation about future growth, while a low P/E ratio means they have low expectations about future growth.

Check out our latest analysis for F8 Enterprises (Holdings) Group

Does F8 Enterprises (Holdings) Group Have A Relatively High Or Low P/E For Its Industry?

F8 Enterprises (Holdings) Group's P/E of 22.84 indicates some degree of optimism towards the stock. As you can see below, F8 Enterprises (Holdings) Group has a much higher P/E than the average company (6.8) in the oil and gas industry.

F8 Enterprises (Holdings) Group's P/E tells us that market participants think the company will perform better than its industry peers, going forward. The market is optimistic about the future, but that doesn't guarantee future growth. 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. That means unless the share price falls, the P/E will increase in a few years. So while a stock may look cheap based on past earnings, it could be expensive based on future earnings.

F8 Enterprises (Holdings) Group shrunk earnings per share by 6.0% last year. And it has shrunk its earnings per share by 80% per year over the last three years. This growth rate might warrant a low P/E ratio. So you wouldn't expect a very high P/E.

Remember: P/E Ratios Don't Consider The Balance Sheet

The 'Price' in P/E reflects the market capitalization of the company. That means it doesn't take debt or cash into account. In theory, a company can lower its future P/E ratio by using cash or debt to invest in growth.