With a price-to-earnings (or "P/E") ratio of 37.3x Dawning Information Industry Co., Ltd. (SHSE:603019) may be sending bearish signals at the moment, given that almost half of all companies in China have P/E ratios under 29x and even P/E's lower than 18x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.
Recent times have been advantageous for Dawning Information Industry as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.
Keen to find out how analysts think Dawning Information Industry's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Growth Metrics Telling Us About The High P/E?
Dawning Information Industry's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.
If we review the last year of earnings growth, the company posted a terrific increase of 19%. The latest three year period has also seen an excellent 102% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Looking ahead now, EPS is anticipated to climb by 34% during the coming year according to the seven analysts following the company. With the market predicted to deliver 35% growth , the company is positioned for a comparable earnings result.
In light of this, it's curious that Dawning Information Industry's P/E sits above the majority of other companies. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as this level of earnings growth is likely to weigh down the share price eventually.
The Final Word
Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
We've established that Dawning Information Industry currently trades on a higher than expected P/E since its forecast growth is only in line with the wider market. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.
A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Dawning Information Industry with six simple checks will allow you to discover any risks that could be an issue.
You might be able to find a better investment than Dawning Information Industry. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
P/E比が37.3倍のDawning Information Industry Co.、Ltd. (SHSE:603019)が弱気なシグナルを発信している可能性があります。中国のほぼ半数の企業がP/E比が29倍以下であり、18倍以下の企業も珍しくありません。しかし、P/E比が高い理由があるかどうかは、さらなる調査が必要です。
最近の時期は、Dawning Information Industryの収益が他の多くの企業よりも速く上昇しているため、好影響をもたらしています。強い収益成長の持続が期待されているため、P/E比が上がっています。もしそうでなければ、株主は株価の持続可能性について少し神経質になるかもしれません。
Dawning Information Industryの将来について、アナリストがどのように考えているかを知りたいですか?その場合、当社の無料レポートは最適の出発点です。
成長指標が示す高P/Eについて何を学べるのか?
Dawning Information IndustryのP/E比は、強力な収益成長を実現し、重要なのは市場よりも優れたパフォーマンスを発揮すると期待されている企業に典型的です。
このため、Dawning Information IndustryのP/E比が他の多くの企業よりも高いのは不思議なことです。ほとんどの投資家が、平均的な成長期待を無視し、株式への露出を高く支払うことに興味を持っているようです。しかしながら、このレベルの収益成長は、株価を最終的に押し下げる可能性があるため、追加の利益を上げることは困難です。
Dawning Information Industryが現在予想される成長に対して予想以上のP/Eで取引しているため、我々は、市場よりも成長期待が平均的な利益見通しを見ると、株価が下がり、高いP/Eが低くなるリスクがあると疑っています。これらの条件が改善されない限り、これらの価格を合理的であると受け入れるのは難しいでしょう。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。