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    Benign Growth For SouthGobi Resources Ltd. (CVE:SGQ) Underpins Stock's 36% Plummet

    Simply Wall St·12/10/2025 10:50:19
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    The SouthGobi Resources Ltd. (CVE:SGQ) share price has fared very poorly over the last month, falling by a substantial 36%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 60% loss during that time.

    After such a large drop in price, given about half the companies in Canada have price-to-earnings ratios (or "P/E's") above 16x, you may consider SouthGobi Resources as a highly attractive investment with its 3.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

    We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

    For instance, SouthGobi Resources' receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

    Check out our latest analysis for SouthGobi Resources

    pe-multiple-vs-industry
    TSXV:SGQ Price to Earnings Ratio vs Industry December 10th 2025
    Want the full picture on earnings, revenue and cash flow for the company? Then our free report on SouthGobi Resources will help you shine a light on its historical performance.

    How Is SouthGobi Resources' Growth Trending?

    In order to justify its P/E ratio, SouthGobi Resources would need to produce anemic growth that's substantially trailing the market.

    If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 64%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

    This is in contrast to the rest of the market, which is expected to grow by 23% over the next year, materially higher than the company's recent medium-term annualised growth rates.

    In light of this, it's understandable that SouthGobi Resources' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

    The Key Takeaway

    Shares in SouthGobi Resources have plummeted and its P/E is now low enough to touch the ground. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

    We've established that SouthGobi Resources maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

    We don't want to rain on the parade too much, but we did also find 6 warning signs for SouthGobi Resources (4 make us uncomfortable!) that you need to be mindful of.

    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).