Shenzhen Aisidi Co., Ltd. (SZSE:002416) shares have continued their recent momentum with a 32% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 88%.

Although its price has surged higher, Shenzhen Aisidi may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 27.3x, since almost half of all companies in China have P/E ratios greater than 34x and even P/E's higher than 67x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Shenzhen Aisidi certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. 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?

There's an inherent assumption that a company should underperform the market for P/E ratios like Shenzhen Aisidi's to be considered reasonable.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.7% last year. Still, lamentably EPS has fallen 32% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 29% during the coming year according to the dual analysts following the company. That's shaping up to be materially lower than the 41% growth forecast for the broader market.

In light of this, it's understandable that Shenzhen Aisidi's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Shenzhen Aisidi's P/E

Despite Shenzhen Aisidi's shares building up a head of steam, its P/E still lags 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.

We've established that Shenzhen Aisidi maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Shenzhen Aisidi you should know about.

If you're unsure about the strength of Shenzhen Aisidi'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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