After Leaping 26% China Marine Information Electronics Company Limited (SHSE:600764) Shares Are Not Flying Under The Radar

The China Marine Information Electronics Company Limited (SHSE:600764) share price has done very well over the last month, posting an excellent gain of 26%. Unfortunately, despite the strong performance over the last month, the full year gain of 9.2% isn't as attractive.

After such a large jump in price, given close to half the companies in China have price-to-earnings ratios (or "P/E's") below 29x, you may consider China Marine Information Electronics as a stock to avoid entirely with its 60.8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

China Marine Information Electronics has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for China Marine Information Electronics

If you'd like to see what analysts are forecasting going forward, you should check out our free report on China Marine Information Electronics.

How Is China Marine Information Electronics' Growth Trending?

China Marine Information Electronics' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered a frustrating 45% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 63% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 29% per year during the coming three years according to the two analysts following 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 China Marine Information Electronics' 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 Final Word

The strong share price surge has got China Marine Information Electronics' P/E rushing to great heights as well. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of China Marine Information Electronics' 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.

Having said that, be aware China Marine Information Electronics is showing 2 warning signs in our investment analysis, you should know about.

You might be able to find a better investment than China Marine Information Electronics. 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.