Cautious Investors Not Rewarding NBTM New Materials Group Co., Ltd.'s (SHSE:600114) Performance Completely

With a median price-to-earnings (or "P/E") ratio of close to 27x in China, you could be forgiven for feeling indifferent about NBTM New Materials Group Co., Ltd.'s (SHSE:600114) P/E ratio of 24.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been pleasing for NBTM New Materials Group as its earnings have risen in spite of the market's earnings going into reverse. 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.

Check out our latest analysis for NBTM New Materials Group

Keen to find out how analysts think NBTM New Materials Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Growth For NBTM New Materials Group?

The only time you'd be comfortable seeing a P/E like NBTM New Materials Group's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 142% gain to the company's bottom line. Pleasingly, EPS has also lifted 281% 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 seven analysts covering the company suggest earnings should grow by 23% each year over the next three years. That's shaping up to be materially higher than the 20% each year growth forecast for the broader market.

With this information, we find it interesting that NBTM New Materials Group is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On NBTM New Materials Group'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.

We've established that NBTM New Materials Group currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for NBTM New Materials Group (2 shouldn't be ignored!) that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.