It's not a stretch to say that Shanghai Yct Electronics Group Co.,Ltd's (SZSE:301099) price-to-earnings (or "P/E") ratio of 35.3x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 35x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
Shanghai Yct Electronics GroupLtd 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. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
How Is Shanghai Yct Electronics GroupLtd's Growth Trending?
The only time you'd be comfortable seeing a P/E like Shanghai Yct Electronics GroupLtd's is when the company's growth is tracking the market closely.
Taking a look back first, we see that the company grew earnings per share by an impressive 65% last year. Still, incredibly EPS has fallen 5.4% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Turning to the outlook, the next year should generate growth of 89% as estimated by the one analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 38%, which is noticeably less attractive.
With this information, we find it interesting that Shanghai Yct Electronics GroupLtd is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Bottom Line On Shanghai Yct Electronics GroupLtd's P/E
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.
Our examination of Shanghai Yct Electronics GroupLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
Plus, you should also learn about these 2 warning signs we've spotted with Shanghai Yct Electronics GroupLtd (including 1 which can't be ignored).
If you're unsure about the strength of Shanghai Yct Electronics GroupLtd'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.
