With A 26% Price Drop For KEBODA TECHNOLOGY Co., Ltd. (SHSE:603786) You'll Still Get What You Pay For

KEBODA TECHNOLOGY Co., Ltd. (SHSE:603786) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 33% share price drop.

In spite of the heavy fall in price, there still wouldn't be many who think KEBODA TECHNOLOGY's price-to-earnings (or "P/E") ratio of 29.4x is worth a mention when the median P/E in China is similar at about 28x. 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 advantageous for KEBODA TECHNOLOGY as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 KEBODA TECHNOLOGY

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

What Are Growth Metrics Telling Us About The P/E?

The only time you'd be comfortable seeing a P/E like KEBODA TECHNOLOGY'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 43% last year. EPS has also lifted 29% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 24% per annum during the coming three years according to the seven analysts following the company. That's shaping up to be similar to the 25% each year growth forecast for the broader market.

With this information, we can see why KEBODA TECHNOLOGY is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From KEBODA TECHNOLOGY's P/E?

KEBODA TECHNOLOGY's plummeting stock price has brought its P/E right back to the rest of the market. 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 KEBODA TECHNOLOGY maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. Unless these conditions change, they will continue to support the share price at these levels.

You always need to take note of risks, for example - KEBODA TECHNOLOGY has 1 warning sign we think you should be aware of.

You might be able to find a better investment than KEBODA TECHNOLOGY. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com