Fujian Zitian Media Technology Co., Ltd. (SZSE:300280) shares have had a really impressive month, gaining 31% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 90%.

Even after such a large jump in price, Fujian Zitian Media Technology may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 24.8x, since almost half of all companies in China have P/E ratios greater than 32x 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.

Fujian Zitian Media Technology certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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 out of favour.

What Are Growth Metrics Telling Us About The Low P/E?

Fujian Zitian Media Technology's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 227% last year. The latest three year period has also seen a 7.0% overall rise in EPS, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 39% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why Fujian Zitian Media Technology is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On Fujian Zitian Media Technology's P/E

Despite Fujian Zitian Media Technology's shares building up a head of steam, its P/E still lags most other companies. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Fujian Zitian Media Technology revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Fujian Zitian Media Technology you should be aware of.

If you're unsure about the strength of Fujian Zitian Media Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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