KEBODA TECHNOLOGY Co., Ltd.'s (SHSE:603786) 37% Jump Shows Its Popularity With Investors

KEBODA TECHNOLOGY Co., Ltd. (SHSE:603786) shareholders are no doubt pleased to see that the share price has bounced 37% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 16% in the last twelve months.

Following the firm bounce in price, KEBODA TECHNOLOGY may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 34.9x, since almost half of all companies in China have P/E ratios under 29x and even P/E's lower than 18x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

KEBODA TECHNOLOGY 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 seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for KEBODA TECHNOLOGY

If you'd like to see what analysts are forecasting going forward, you should check out our free report on KEBODA TECHNOLOGY.

Is There Enough Growth For KEBODA TECHNOLOGY?

There's an inherent assumption that a company should outperform the market for P/E ratios like KEBODA TECHNOLOGY's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 34% gain to the company's bottom line. Pleasingly, EPS has also lifted 31% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 24% each year as estimated by the ten analysts watching the company. With the market only predicted to deliver 19% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that KEBODA TECHNOLOGY's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

KEBODA TECHNOLOGY's P/E is getting right up there since its shares have risen strongly. 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.

As we suspected, our examination of KEBODA TECHNOLOGY's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for KEBODA TECHNOLOGY that you should be aware of.

If you're unsure about the strength of KEBODA TECHNOLOGY'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.