Earnings Tell The Story For Ficont Industry (Beijing) Co., Ltd. (SHSE:605305) As Its Stock Soars 25%

Despite an already strong run, Ficont Industry (Beijing) Co., Ltd. (SHSE:605305) shares have been powering on, with a gain of 25% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Since its price has surged higher, Ficont Industry (Beijing)'s price-to-earnings (or "P/E") ratio of 42.3x might make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 29x and even P/E's below 18x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

Recent times haven't been advantageous for Ficont Industry (Beijing) as its earnings have been falling quicker 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.

See our latest analysis for Ficont Industry (Beijing)

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

How Is Ficont Industry (Beijing)'s Growth Trending?

In order to justify its P/E ratio, Ficont Industry (Beijing) would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered a frustrating 21% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 45% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 104% during the coming year according to the two analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 41%, which is noticeably less attractive.

In light of this, it's understandable that Ficont Industry (Beijing)'s 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 Bottom Line On Ficont Industry (Beijing)'s P/E

Ficont Industry (Beijing)'s P/E is getting right up there since its shares have risen strongly. 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.

As we suspected, our examination of Ficont Industry (Beijing)'s 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. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Ficont Industry (Beijing) that you need to be mindful of.

If you're unsure about the strength of Ficont Industry (Beijing)'s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.