Zhejiang Sling Automobile Bearing Co., Ltd. (SZSE:301550) shareholders would be excited to see that the share price has had a great month, posting a 37% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 5.1% over the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Zhejiang Sling Automobile Bearing's P/E ratio of 30.5x, since the median price-to-earnings (or "P/E") ratio in China is also close to 33x. 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.

The recently shrinking earnings for Zhejiang Sling Automobile Bearing have been in line with the market. The P/E is probably moderate because investors think the company's earnings trend will continue to follow the rest of the market. You'd much rather the company wasn't bleeding earnings if you still believe in the business. At the very least, you'd be hoping that earnings don't accelerate downwards if your plan is to pick up some stock while it's not in favour.

Is There Some Growth For Zhejiang Sling Automobile Bearing?

In order to justify its P/E ratio, Zhejiang Sling Automobile Bearing would need to produce growth that's similar to the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 49% overall rise in EPS, in spite of its uninspiring short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 34% over the next year. Meanwhile, the rest of the market is forecast to expand by 37%, which is not materially different.

In light of this, it's understandable that Zhejiang Sling Automobile Bearing's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Zhejiang Sling Automobile Bearing's P/E

Its shares have lifted substantially and now Zhejiang Sling Automobile Bearing's P/E is also back up to the market median. 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.

As we suspected, our examination of Zhejiang Sling Automobile Bearing's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Zhejiang Sling Automobile Bearing (including 2 which are a bit concerning).

If you're unsure about the strength of Zhejiang Sling Automobile Bearing'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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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.