Market Still Lacking Some Conviction On Zhejiang Huatie Emergency Equipment Science & Technology Co.,Ltd. (SHSE:603300)

With a price-to-earnings (or "P/E") ratio of 11.2x Zhejiang Huatie Emergency Equipment Science & Technology Co.,Ltd. (SHSE:603300) may be sending very bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 28x and even P/E's higher than 53x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been advantageous for Zhejiang Huatie Emergency Equipment Science & TechnologyLtd as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 out of favour.

Check out our latest analysis for Zhejiang Huatie Emergency Equipment Science & TechnologyLtd

Want the full picture on analyst estimates for the company? Then our free report on Zhejiang Huatie Emergency Equipment Science & TechnologyLtd will help you uncover what's on the horizon.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Zhejiang Huatie Emergency Equipment Science & TechnologyLtd would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered an exceptional 19% gain to the company's bottom line. The latest three year period has also seen an excellent 70% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 23% per year during the coming three years according to the six analysts following the company. Meanwhile, the rest of the market is forecast to expand by 24% per year, which is not materially different.

With this information, we find it odd that Zhejiang Huatie Emergency Equipment Science & TechnologyLtd is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Zhejiang Huatie Emergency Equipment Science & TechnologyLtd's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Zhejiang Huatie Emergency Equipment Science & TechnologyLtd you should be aware of.

Of course, you might also be able to find a better stock than Zhejiang Huatie Emergency Equipment Science & TechnologyLtd. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.