Index Options
CME Group
Nasdaq
Cboe
TradingView
Wall Street JournalJiangsu Yinhe Electronics Co.,Ltd. (SZSE:002519) Stocks Shoot Up 39% But Its P/E Still Looks Reasonable
Jiangsu Yinhe Electronics Co.,Ltd. (SZSE:002519) shares have had a really impressive month, gaining 39% after a shaky period beforehand. Looking further back, the 14% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Jiangsu Yinhe ElectronicsLtd's P/E ratio of 30.1x, since the median price-to-earnings (or "P/E") ratio in China is also close to 32x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
The earnings growth achieved at Jiangsu Yinhe ElectronicsLtd over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.
View our latest analysis for Jiangsu Yinhe ElectronicsLtd
Is There Some Growth For Jiangsu Yinhe ElectronicsLtd?
There's an inherent assumption that a company should be matching the market for P/E ratios like Jiangsu Yinhe ElectronicsLtd's to be considered reasonable.
Taking a look back first, we see that the company managed to grow earnings per share by a handy 8.1% last year. Pleasingly, EPS has also lifted 175% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 37% shows it's about the same on an annualised basis.
With this information, we can see why Jiangsu Yinhe ElectronicsLtd is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.
The Bottom Line On Jiangsu Yinhe ElectronicsLtd's P/E
Jiangsu Yinhe ElectronicsLtd appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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 Jiangsu Yinhe ElectronicsLtd revealed its three-year earnings trends are contributing to its P/E, given they look similar to current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.
There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Jiangsu Yinhe ElectronicsLtd that you should be aware of.
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.
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.