Allgens Medical Technology CO., LTD. (SHSE:688613) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.
After such a large jump in price, Allgens Medical Technology may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 49.1x, since almost half of all companies in China have P/E ratios under 27x and even P/E's lower than 16x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.
For instance, Allgens Medical Technology's receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Allgens Medical Technology's earnings, revenue and cash flow.
What Are Growth Metrics Telling Us About The High P/E?
In order to justify its P/E ratio, Allgens Medical Technology would need to produce outstanding growth well in excess of the market.
Retrospectively, the last year delivered a frustrating 57% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 71% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.
Comparing that to the market, which is predicted to deliver 36% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.
In light of this, it's alarming that Allgens Medical Technology's P/E sits above the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.
The Final Word
Allgens Medical Technology's P/E is flying high just like its stock has during the last month. 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.
We've established that Allgens Medical Technology currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the high P/E lower. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.
And what about other risks? Every company has them, and we've spotted 4 warning signs for Allgens Medical Technology (of which 1 is significant!) you should know about.
Of course, you might also be able to find a better stock than Allgens Medical Technology. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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.
Allgens Medical Technology CO., LTD.(SHSE:688613)股票在動盪期後表現出色,本月大漲30%,但仍有33%的股票持有人感到失望,因爲股價在過去12個月中仍下跌了33%。
股票價格呈現大幅上漲後,Allgens Medical Technology目前可能正在發出消極信號,其市盈率爲49.1倍,中國近一半公司的市盈率均在27倍以下,甚至低於16倍的市盈率也很普遍。但是,高市盈率可能有其道理,需要進一步調查以確定其是否合理。
比如,近期Allgens Medical Technology的收益下降可能需要認真思考。這可能意味着許多人期望該公司在未來一個時期內仍能取得大多數其他公司無法超越的優異表現,這也使得市盈率沒有崩潰。否則,您將爲沒有特殊原因支付一筆相當昂貴的價格。
儘管我們沒有分析師預測,但您可以查看我們有關Allgens Medical Technology收益、營業收入和現金流的免費報告,以了解未來趨勢如何形成公司的前景。
增長指標告訴我們關於高市盈率的什麼?
爲了證明其市盈率,Allgens Medical Technology需要產生遠遠超過市場的出色增長。
鑑於此,讓人驚訝的是Allgens Medical Technology的市盈率高於大多數其他公司。看來大多數投資者正在忽視最近的低增長率,並希望該公司的業務前景能夠好轉。如果市盈率下跌到與最近的負增長率相符的水平,現有股東很有可能爲未來失望做好心理準備。
最終結論
正如Allgens Medical Technology的股價在過去一個月中一樣,其市盈率也飛漲。我們認爲市盈率的力量主要不在於估值工具,而在於衡量當前投資者情緒和未來預期。
我們已經確定,由於其近期收益短期內呈下降趨勢,所以Allgens Medical Technology目前交易的市盈率比預期高得多。當我們看到收益出現倒退並低於市場預測時,我們懷疑股票價格面臨下跌風險,市盈率也將下降。如果最近的中期收益趨勢持續下去,將會對股東投資產生巨大風險,潛在投資者也面臨支付過高溢價的危險。
那麼其他風險呢?每個公司都有它們,我們已經發現Allgens Medical Technology的4個警告信號(其中1個顯著),您需要知道。
當然,您可能也能找到比Allgens Medical Technology更好的股票。因此,您可能希望查看我們對市盈率合理且收益增長強勁的其他公司的免費彙編。