Guangzhou Sie Consulting Co., Ltd. (SZSE:300687) shares have had a really impressive month, gaining 46% 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 20% over that time.

Although its price has surged higher, there still wouldn't be many who think Guangzhou Sie Consulting's price-to-earnings (or "P/E") ratio of 28.7x is worth a mention when the median P/E in China is similar at about 30x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Guangzhou Sie Consulting has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Does Growth Match The P/E?

Guangzhou Sie Consulting's 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 grew earnings per share by an impressive 27% last year. As a result, it also grew EPS by 29% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 22% per year over the next three years. With the market only predicted to deliver 19% per year, the company is positioned for a stronger earnings result.

With this information, we find it interesting that Guangzhou Sie Consulting is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Guangzhou Sie Consulting's P/E?

Guangzhou Sie Consulting appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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 Guangzhou Sie Consulting's 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. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Guangzhou Sie Consulting that you should be aware of.

Of course, you might also be able to find a better stock than Guangzhou Sie Consulting. 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.