Further Upside For Ningbo Shuanglin Auto Parts Co.,Ltd. (SZSE:300100) Shares Could Introduce Price Risks After 63% Bounce

Ningbo Shuanglin Auto Parts Co.,Ltd. (SZSE:300100) shares have continued their recent momentum with a 63% gain in the last month alone. The last month tops off a massive increase of 214% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Ningbo Shuanglin Auto PartsLtd's 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. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been quite advantageous for Ningbo Shuanglin Auto PartsLtd as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

View our latest analysis for Ningbo Shuanglin Auto PartsLtd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Ningbo Shuanglin Auto PartsLtd will help you shine a light on its historical performance.

How Is Ningbo Shuanglin Auto PartsLtd's Growth Trending?

Ningbo Shuanglin Auto PartsLtd's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered an exceptional 293% gain to the company's bottom line. Pleasingly, EPS has also lifted 2,656% 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.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 38% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that Ningbo Shuanglin Auto PartsLtd is trading at a fairly similar P/E to the market. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Key Takeaway

Ningbo Shuanglin Auto PartsLtd's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Ningbo Shuanglin Auto PartsLtd currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Ningbo Shuanglin Auto PartsLtd, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Ningbo Shuanglin Auto PartsLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.