Suzhou Shijing Environmental Technology Co.,Ltd. (SZSE:301030) Stock Rockets 27% But Many Are Still Ignoring The Company

Simply Wall St · 09/27 23:26

Suzhou Shijing Environmental Technology Co.,Ltd. (SZSE:301030) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.

Although its price has surged higher, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 29x, you may still consider Suzhou Shijing Environmental TechnologyLtd as an attractive investment with its 20.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Suzhou Shijing Environmental TechnologyLtd has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, 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.

See our latest analysis for Suzhou Shijing Environmental TechnologyLtd

pe-multiple-vs-industry
SZSE:301030 Price to Earnings Ratio vs Industry September 27th 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Suzhou Shijing Environmental TechnologyLtd.

How Is Suzhou Shijing Environmental TechnologyLtd's Growth Trending?

In order to justify its P/E ratio, Suzhou Shijing Environmental TechnologyLtd would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 43% last year. The strong recent performance means it was also able to grow EPS by 77% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 112% each year over the next three years. That's shaping up to be materially higher than the 19% each year growth forecast for the broader market.

In light of this, it's peculiar that Suzhou Shijing Environmental TechnologyLtd's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Despite Suzhou Shijing Environmental TechnologyLtd's shares building up a head of steam, its P/E still lags most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Suzhou Shijing Environmental TechnologyLtd currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Suzhou Shijing Environmental TechnologyLtd (3 shouldn't be ignored!) that you should be aware of before investing here.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.