Suzhou Maxwell Technologies Co., Ltd. (SZSE:300751) shareholders would be excited to see that the share price has had a great month, posting a 46% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.
In spite of the firm bounce in price, there still wouldn't be many who think Suzhou Maxwell Technologies' price-to-earnings (or "P/E") ratio of 30.9x is worth a mention when the median P/E in China is similar at about 33x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
Suzhou Maxwell Technologies 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 might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
Check out our latest analysis for Suzhou Maxwell Technologies
Keen to find out how analysts think Suzhou Maxwell Technologies' future stacks up against the industry? In that case, our free report is a great place to start.Suzhou Maxwell Technologies' P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.
Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.2% last year. Pleasingly, EPS has also lifted 87% in aggregate from three years ago, partly thanks to the last 12 months of growth. 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 29% per year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 18% per annum, which is noticeably less attractive.
With this information, we find it interesting that Suzhou Maxwell Technologies is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.
Its shares have lifted substantially and now Suzhou Maxwell Technologies' P/E is also back up to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
Our examination of Suzhou Maxwell Technologies' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
It is also worth noting that we have found 4 warning signs for Suzhou Maxwell Technologies (2 shouldn't be ignored!) that you need to take into consideration.
If these risks are making you reconsider your opinion on Suzhou Maxwell Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.