The Shandong Gold Phoenix Co.,Ltd (SHSE:603586) share price has done very well over the last month, posting an excellent gain of 27%. Looking further back, the 22% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, Shandong Gold PhoenixLtd may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 20.7x, since almost half of all companies in China have P/E ratios greater than 37x and even P/E's higher than 68x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's exceedingly strong of late, Shandong Gold PhoenixLtd has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Shandong Gold PhoenixLtd

Is There Any Growth For Shandong Gold PhoenixLtd?

The only time you'd be truly comfortable seeing a P/E as low as Shandong Gold PhoenixLtd's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 46% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 46% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Shandong Gold PhoenixLtd's P/E sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Shandong Gold PhoenixLtd's P/E?

Despite Shandong Gold PhoenixLtd's shares building up a head of steam, its P/E still lags 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.

We've established that Shandong Gold PhoenixLtd maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Shandong Gold PhoenixLtd (of which 1 is concerning!) you should know about.

Of course, you might also be able to find a better stock than Shandong Gold PhoenixLtd. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.