There Is A Reason Jack Technology Co.,Ltd's (SHSE:603337) Price Is Undemanding

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 39x, you may consider Jack Technology Co.,Ltd (SHSE:603337) as an attractive investment with its 19.4x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Jack TechnologyLtd certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Jack TechnologyLtd

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

Is There Any Growth For Jack TechnologyLtd?

There's an inherent assumption that a company should underperform the market for P/E ratios like Jack TechnologyLtd's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 60% gain to the company's bottom line. Pleasingly, EPS has also lifted 73% 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.

Turning to the outlook, the next year should generate growth of 26% as estimated by the seven analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 37%, which is noticeably more attractive.

In light of this, it's understandable that Jack TechnologyLtd's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Jack TechnologyLtd's P/E?

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 Jack TechnologyLtd maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Jack TechnologyLtd you should be aware of.

If these risks are making you reconsider your opinion on Jack TechnologyLtd, 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.