Optimistic Investors Push Beijing Yupont Electric Power Technology Co., Ltd. (SHSE:688597) Shares Up 36% But Growth Is Lacking

Despite an already strong run, Beijing Yupont Electric Power Technology Co., Ltd. (SHSE:688597) shares have been powering on, with a gain of 36% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 21% is also fairly reasonable.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Beijing Yupont Electric Power Technology's P/E ratio of 32.1x, since the median price-to-earnings (or "P/E") ratio in China is also close to 34x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's exceedingly strong of late, Beijing Yupont Electric Power Technology has been doing very well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

View our latest analysis for Beijing Yupont Electric Power Technology

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Beijing Yupont Electric Power Technology's earnings, revenue and cash flow.

Is There Some Growth For Beijing Yupont Electric Power Technology?

In order to justify its P/E ratio, Beijing Yupont Electric Power Technology would need to produce growth that's similar to the market.

Retrospectively, the last year delivered an exceptional 31% gain to the company's bottom line. Still, incredibly EPS has fallen 15% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 37% shows it's an unpleasant look.

With this information, we find it concerning that Beijing Yupont Electric Power Technology is trading at a fairly similar P/E to the market. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Final Word

Its shares have lifted substantially and now Beijing Yupont Electric Power Technology's P/E is also back up to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Beijing Yupont Electric Power Technology currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about this 1 warning sign we've spotted with Beijing Yupont Electric Power Technology.

If you're unsure about the strength of Beijing Yupont Electric Power Technology'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.