Nantong Xingqiu Graphite Co.,Ltd. (SHSE:688633) Stock Rockets 33% But Many Are Still Ignoring The Company

Nantong Xingqiu Graphite Co.,Ltd. (SHSE:688633) shares have had a really impressive month, gaining 33% after a shaky period beforehand. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Although its price has surged higher, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 32x, you may still consider Nantong Xingqiu GraphiteLtd as an attractive investment with its 24.9x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times haven't been advantageous for Nantong Xingqiu GraphiteLtd as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

See our latest analysis for Nantong Xingqiu GraphiteLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nantong Xingqiu GraphiteLtd.

How Is Nantong Xingqiu GraphiteLtd's Growth Trending?

Nantong Xingqiu GraphiteLtd's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 26%. This means it has also seen a slide in earnings over the longer-term as EPS is down 30% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the lone analyst 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 19% each year growth forecast for the broader market.

With this information, we find it odd that Nantong Xingqiu GraphiteLtd is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Nantong Xingqiu GraphiteLtd's P/E?

The latest share price surge wasn't enough to lift Nantong Xingqiu GraphiteLtd's P/E close to the market median. 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 Nantong Xingqiu GraphiteLtd currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for Nantong Xingqiu GraphiteLtd that you need to take into consideration.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.