When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may consider Zhejiang Huatie Emergency Equipment Science & Technology Co.,Ltd. (SHSE:603300) as a highly attractive investment with its 12.1x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Zhejiang Huatie Emergency Equipment Science & TechnologyLtd certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

How Is Zhejiang Huatie Emergency Equipment Science & TechnologyLtd's Growth Trending?

Zhejiang Huatie Emergency Equipment Science & TechnologyLtd's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Retrospectively, the last year delivered an exceptional 19% gain to the company's bottom line. Pleasingly, EPS has also lifted 70% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 23% per annum as estimated by the eight analysts watching the company. With the market predicted to deliver 24% growth per annum, the company is positioned for a comparable earnings result.

In light of this, it's peculiar that Zhejiang Huatie Emergency Equipment Science & TechnologyLtd'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 Zhejiang Huatie Emergency Equipment Science & TechnologyLtd's P/E

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.

Our examination of Zhejiang Huatie Emergency Equipment Science & TechnologyLtd's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Zhejiang Huatie Emergency Equipment Science & TechnologyLtd (1 shouldn't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Zhejiang Huatie Emergency Equipment Science & TechnologyLtd, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com