Xi'an Bright Laser Technologies Co.,Ltd. (SHSE:688333) Not Flying Under The Radar

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 29x, you may consider Xi'an Bright Laser Technologies Co.,Ltd. (SHSE:688333) as a stock to avoid entirely with its 76.9x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Xi'an Bright Laser TechnologiesLtd as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Xi'an Bright Laser TechnologiesLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Xi'an Bright Laser TechnologiesLtd.

Does Growth Match The High P/E?

Xi'an Bright Laser TechnologiesLtd's 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.

Taking a look back first, we see that the company grew earnings per share by an impressive 114% last year. The strong recent performance means it was also able to grow EPS by 162% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 46% each year over the next three years. That's shaping up to be materially higher than the 25% per annum growth forecast for the broader market.

With this information, we can see why Xi'an Bright Laser TechnologiesLtd is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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 Xi'an Bright Laser TechnologiesLtd's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Xi'an Bright Laser TechnologiesLtd (1 is significant!) that you should be aware of.

You might be able to find a better investment than Xi'an Bright Laser TechnologiesLtd. 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.

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