Investors Still Aren't Entirely Convinced By Infore Environment Technology Group Co., Ltd.'s (SZSE:000967) Earnings Despite 30% Price Jump

The Infore Environment Technology Group Co., Ltd. (SZSE:000967) share price has done very well over the last month, posting an excellent gain of 30%. Looking back a bit further, it's encouraging to see the stock is up 34% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Infore Environment Technology Group's P/E ratio of 39.7x, since the median price-to-earnings (or "P/E") ratio in China is also close to 37x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been pleasing for Infore Environment Technology Group as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Infore Environment Technology Group

Keen to find out how analysts think Infore Environment Technology Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Infore Environment Technology Group's Growth Trending?

Infore Environment Technology Group's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.7% last year. Still, lamentably EPS has fallen 53% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 50% as estimated by the two analysts watching the company. With the market only predicted to deliver 37%, the company is positioned for a stronger earnings result.

In light of this, it's curious that Infore Environment Technology Group's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Its shares have lifted substantially and now Infore Environment Technology Group's P/E is also back up 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 Infore Environment Technology Group currently trades on a 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 pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Infore Environment Technology Group you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.