Even With A 30% Surge, Cautious Investors Are Not Rewarding Jiangsu LiXing General Steel Ball Co.,Ltd.'s (SZSE:300421) Performance Completely

Those holding Jiangsu LiXing General Steel Ball Co.,Ltd. (SZSE:300421) shares would be relieved that the share price has rebounded 30% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Jiangsu LiXing General Steel BallLtd's price-to-earnings (or "P/E") ratio of 32.6x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 30x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Jiangsu LiXing General Steel BallLtd has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, 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.

See our latest analysis for Jiangsu LiXing General Steel BallLtd

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

Does Growth Match The P/E?

Jiangsu LiXing General Steel BallLtd'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.

If we review the last year of earnings growth, the company posted a terrific increase of 75%. The latest three year period has also seen an excellent 96% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest earnings should grow by 164% over the next year. With the market only predicted to deliver 41%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that Jiangsu LiXing General Steel BallLtd 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 Jiangsu LiXing General Steel BallLtd's P/E

Its shares have lifted substantially and now Jiangsu LiXing General Steel BallLtd's P/E is also back up to the market median. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Jiangsu LiXing General Steel BallLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. 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. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you take the next step, you should know about the 3 warning signs for Jiangsu LiXing General Steel BallLtd (1 doesn't sit too well with us!) that we have uncovered.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.