C&D Holsin Engineering Consulting Co., Ltd (SHSE:603909) shareholders would be excited to see that the share price has had a great month, posting a 32% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 21% over that time.

Even after such a large jump in price, it's still not a stretch to say that C&D Holsin Engineering Consulting's price-to-earnings (or "P/E") ratio of 29.6x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 32x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With its earnings growth in positive territory compared to the declining earnings of most other companies, C&D Holsin Engineering Consulting has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. 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 not quite in favour.

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

The only time you'd be comfortable seeing a P/E like C&D Holsin Engineering Consulting's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 19%. Pleasingly, EPS has also lifted 55% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 17% per year during the coming three years according to the only analyst following the company. With the market predicted to deliver 18% growth each year, the company is positioned for a comparable earnings result.

With this information, we can see why C&D Holsin Engineering Consulting is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

C&D Holsin Engineering Consulting appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of C&D Holsin Engineering Consulting's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for C&D Holsin Engineering Consulting you should know about.

You might be able to find a better investment than C&D Holsin Engineering Consulting. 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).

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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.