Jiangsu Cnano Technology Co., Ltd. (SHSE:688116) Stock Rockets 36% But Many Are Still Ignoring The Company

Simply Wall St · 10/18 23:02

Jiangsu Cnano Technology Co., Ltd. (SHSE:688116) shareholders would be excited to see that the share price has had a great month, posting a 36% gain and recovering from prior weakness. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Although its price has surged higher, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 32x, you may still consider Jiangsu Cnano Technology as an attractive investment with its 28.4x 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.

Jiangsu Cnano Technology 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. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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 Jiangsu Cnano Technology

pe-multiple-vs-industry
SHSE:688116 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 Jiangsu Cnano Technology.

What Are Growth Metrics Telling Us About The Low P/E?

Jiangsu Cnano Technology's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a decent 5.2% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 65% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 28% per annum as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 18% per annum growth forecast for the broader market.

In light of this, it's peculiar that Jiangsu Cnano Technology's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Jiangsu Cnano Technology's P/E

Jiangsu Cnano Technology's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Jiangsu Cnano Technology 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.

Before you take the next step, you should know about the 2 warning signs for Jiangsu Cnano Technology that we have uncovered.

If these risks are making you reconsider your opinion on Jiangsu Cnano Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.