Jiangling Motors Corporation, Ltd. (SZSE:000550) shareholders have had their patience rewarded with a 33% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 62% in the last year.

In spite of the firm bounce in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 34x, you may still consider Jiangling Motors Corporation as a highly attractive investment with its 14.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Jiangling Motors Corporation has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Growth For Jiangling Motors Corporation?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Jiangling Motors Corporation's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 38% gain to the company's bottom line. Pleasingly, EPS has also lifted 148% in aggregate from three years ago, 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 13% each year as estimated by the three analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 19% each year, which is noticeably more attractive.

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

The Final Word

Jiangling Motors Corporation's recent share price jump still sees its P/E sitting firmly flat on the ground. 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 Jiangling Motors Corporation maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Jiangling Motors Corporation (including 1 which makes us a bit uncomfortable).

If these risks are making you reconsider your opinion on Jiangling Motors Corporation, 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.