The Price Is Right For Xiaomi Corporation (HKG:1810)

Simply Wall St.
08/03

With a price-to-earnings (or "P/E") ratio of 41.9x Xiaomi Corporation (HKG:1810) may be sending very bearish signals at the moment, given that almost half of all companies in Hong Kong have P/E ratios under 11x and even P/E's lower than 7x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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Recent times have been advantageous for Xiaomi as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Xiaomi

SEHK:1810 Price to Earnings Ratio vs Industry August 3rd 2025
Keen to find out how analysts think Xiaomi's future stacks up against the industry? In that case, our free report is a great place to start.
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What Are Growth Metrics Telling Us About The High P/E?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Xiaomi's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 75% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 178% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 29% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 15% per year, which is noticeably less attractive.

With this information, we can see why Xiaomi is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Xiaomi's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Xiaomi with six simple checks.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

免責聲明:投資有風險,本文並非投資建議,以上內容不應被視為任何金融產品的購買或出售要約、建議或邀請,作者或其他用戶的任何相關討論、評論或帖子也不應被視為此類內容。本文僅供一般參考,不考慮您的個人投資目標、財務狀況或需求。TTM對信息的準確性和完整性不承擔任何責任或保證,投資者應自行研究並在投資前尋求專業建議。

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