After Leaping 36% NAURA Technology Group Co., Ltd. (SZSE:002371) Shares Are Not Flying Under The Radar

Simply Wall St · 10/18 22:29

NAURA Technology Group Co., Ltd. (SZSE:002371) shareholders would be excited to see that the share price has had a great month, posting a 36% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 67% in the last year.

Following the firm bounce in price, NAURA Technology Group's price-to-earnings (or "P/E") ratio of 43.7x might make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 31x and even P/E's below 18x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

NAURA Technology Group certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for NAURA Technology Group

pe-multiple-vs-industry
SZSE:002371 Price to Earnings Ratio vs Industry October 18th 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on NAURA Technology Group.

Does Growth Match The High P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 43% last year. Pleasingly, EPS has also lifted 583% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 31% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 18% per annum, which is noticeably less attractive.

With this information, we can see why NAURA Technology Group is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From NAURA Technology Group's P/E?

NAURA Technology Group's P/E is getting right up there since its shares have risen strongly. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that NAURA Technology Group maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.

Before you settle on your opinion, we've discovered 1 warning sign for NAURA Technology Group that you should be aware of.

You might be able to find a better investment than NAURA Technology Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).