Market Might Still Lack Some Conviction On Eurocrane (China) Co., Ltd. (SHSE:603966) Even After 28% Share Price Boost

Eurocrane (China) Co., Ltd. (SHSE:603966) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

Although its price has surged higher, Eurocrane (China) may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 15.9x, since almost half of all companies in China have P/E ratios greater than 32x and even P/E's higher than 58x 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 limited.

Recent times haven't been advantageous for Eurocrane (China) as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Eurocrane (China)

Want the full picture on analyst estimates for the company? Then our free report on Eurocrane (China) will help you uncover what's on the horizon.

How Is Eurocrane (China)'s Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Eurocrane (China)'s is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 2.6% decrease to the company's bottom line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 27% overall rise in EPS. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 59% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 40%, which is noticeably less attractive.

In light of this, it's peculiar that Eurocrane (China)'s P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Eurocrane (China)'s P/E

Eurocrane (China)'s stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Eurocrane (China) currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware Eurocrane (China) is showing 2 warning signs in our investment analysis, you should know about.

Of course, you might also be able to find a better stock than Eurocrane (China). So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.