Despite an already strong run, Quectel Wireless Solutions Co., Ltd. (SHSE:603236) shares have been powering on, with a gain of 29% in the last thirty days. The last 30 days bring the annual gain to a very sharp 25%.

Although its price has surged higher, it's still not a stretch to say that Quectel Wireless Solutions' price-to-earnings (or "P/E") ratio of 35.6x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 37x. 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, Quectel Wireless Solutions has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. 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 not quite in favour.

How Is Quectel Wireless Solutions' Growth Trending?

The only time you'd be comfortable seeing a P/E like Quectel Wireless Solutions' is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company grew earnings per share by an impressive 163% last year. The strong recent performance means it was also able to grow EPS by 51% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 53% during the coming year according to the nine analysts following the company. That's shaping up to be materially higher than the 38% growth forecast for the broader market.

With this information, we find it interesting that Quectel Wireless Solutions 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.

The Final Word

Quectel Wireless Solutions appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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 Quectel Wireless Solutions currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Quectel Wireless Solutions with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.