TianJin 712 Communication & Broadcasting Co., Ltd.'s (SHSE:603712) P/E Is Still On The Mark Following 35% Share Price Bounce

Simply Wall St · 10/21/2024 22:16

TianJin 712 Communication & Broadcasting Co., Ltd. (SHSE:603712) shares have had a really impressive month, gaining 35% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 22% over that time.

Since its price has surged higher, given close to half the companies in China have price-to-earnings ratios (or "P/E's") below 32x, you may consider TianJin 712 Communication & Broadcasting as a stock to avoid entirely with its 49.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

TianJin 712 Communication & Broadcasting has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for TianJin 712 Communication & Broadcasting

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SHSE:603712 Price to Earnings Ratio vs Industry October 21st 2024
Want the full picture on analyst estimates for the company? Then our free report on TianJin 712 Communication & Broadcasting will help you uncover what's on the horizon.

How Is TianJin 712 Communication & Broadcasting's Growth Trending?

In order to justify its P/E ratio, TianJin 712 Communication & Broadcasting would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 61% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 49% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 45% per annum during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 18% per year growth forecast for the broader market.

In light of this, it's understandable that TianJin 712 Communication & Broadcasting's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From TianJin 712 Communication & Broadcasting's P/E?

TianJin 712 Communication & Broadcasting's P/E is flying high just like its stock has during the last month. 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 TianJin 712 Communication & Broadcasting maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for TianJin 712 Communication & Broadcasting that you should be aware of.

If you're unsure about the strength of TianJin 712 Communication & Broadcasting's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.