Despite an already strong run, Shenzhen S.C New Energy Technology Corporation (SZSE:300724) shares have been powering on, with a gain of 26% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 5.3% isn't as attractive.

Although its price has surged higher, Shenzhen S.C New Energy Technology's price-to-earnings (or "P/E") ratio of 11.8x might still make it look like a strong buy right now compared to the market in China, where around half of the companies have P/E ratios above 37x and even P/E's above 74x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been pleasing for Shenzhen S.C New Energy Technology as its earnings have risen in spite of the market's earnings going into reverse. 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.

How Is Shenzhen S.C New Energy Technology's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as depressed as Shenzhen S.C New Energy Technology's is when the company's growth is on track to lag the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 68% last year. Pleasingly, EPS has also lifted 245% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 17% over the next year. With the market predicted to deliver 40% growth , the company is positioned for a weaker earnings result.

With this information, we can see why Shenzhen S.C New Energy Technology is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Shenzhen S.C New Energy Technology's P/E?

Shares in Shenzhen S.C New Energy Technology are going to need a lot more upward momentum to get the company's P/E out of its slump. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Shenzhen S.C New Energy Technology maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 2 warning signs for Shenzhen S.C New Energy Technology that you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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