Those holding Jinlei Technology Co., Ltd. (SZSE:300443) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 44% in the last twelve months.

Although its price has surged higher, Jinlei Technology may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 17.1x, since almost half of all companies in China have P/E ratios greater than 33x and even P/E's higher than 60x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Jinlei Technology as its earnings have been rising faster 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.

Is There Any Growth For Jinlei Technology?

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

If we review the last year of earnings growth, the company posted a terrific increase of 29%. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 19% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 37% over the next year. That's shaping up to be similar to the 40% growth forecast for the broader market.

In light of this, it's peculiar that Jinlei Technology'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 Jinlei Technology's P/E

Jinlei Technology's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Jinlei Technology currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Jinlei Technology (including 1 which shouldn't be ignored).

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.