Doctorglasses Chain Co.,Ltd. (SZSE:300622) shareholders are no doubt pleased to see that the share price has bounced 32% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 29% over that time.

Even after such a large jump in price, Doctorglasses ChainLtd may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 23x, since almost half of all companies in China have P/E ratios greater than 28x and even P/E's higher than 54x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With earnings growth that's superior to most other companies of late, Doctorglasses ChainLtd has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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.

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

In order to justify its P/E ratio, Doctorglasses ChainLtd would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a decent 4.3% gain to the company's bottom line. The latest three year period has also seen a 15% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Looking ahead now, EPS is anticipated to climb by 22% per year during the coming three years according to the two analysts following the company. With the market predicted to deliver 24% growth per year, the company is positioned for a comparable earnings result.

In light of this, it's peculiar that Doctorglasses ChainLtd's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Doctorglasses ChainLtd's P/E

Doctorglasses ChainLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Doctorglasses ChainLtd's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like 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 2 warning signs for Doctorglasses ChainLtd (1 is a bit unpleasant!) that you need to take into consideration.

Of course, you might also be able to find a better stock than Doctorglasses ChainLtd. 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.

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