When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 32x, you may consider Jack Technology Co.,Ltd (SHSE:603337) as an attractive investment with its 22.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
While the market has experienced earnings growth lately, Jack TechnologyLtd's earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
SHSE:603337 Price to Earnings Ratio vs Industry April 6th 2024 Want the full picture on analyst estimates for the company? Then our free report on Jack TechnologyLtd will help you uncover what's on the horizon.
Does Growth Match The Low P/E?
Jack TechnologyLtd'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.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 19%. Even so, admirably EPS has lifted 55% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.
Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 41% over the next year. With the market only predicted to deliver 36%, the company is positioned for a stronger earnings result.
With this information, we find it odd that Jack TechnologyLtd is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
What We Can Learn From Jack TechnologyLtd's P/E?
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.
Our examination of Jack TechnologyLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.
You should always think about risks. Case in point, we've spotted 1 warning sign for Jack TechnologyLtd you should be aware of.
Of course, you might also be able to find a better stock than Jack TechnologyLtd. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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