Zhejiang Jinggong Integration Technology Co., Ltd.'s (SZSE:002006) 32% Jump Shows Its Popularity With Investors

Despite an already strong run, Zhejiang Jinggong Integration Technology Co., Ltd. (SZSE:002006) shares have been powering on, with a gain of 32% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 9.1% isn't as attractive.

Since its price has surged higher, given close to half the companies in China have price-to-earnings ratios (or "P/E's") below 34x, you may consider Zhejiang Jinggong Integration Technology as a stock to avoid entirely with its 66.6x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times haven't been advantageous for Zhejiang Jinggong Integration Technology 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. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Zhejiang Jinggong Integration Technology

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

Is There Enough Growth For Zhejiang Jinggong Integration Technology?

In order to justify its P/E ratio, Zhejiang Jinggong Integration Technology would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 58% decrease to the company's bottom line. Even so, admirably EPS has lifted 30% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 150% during the coming year according to the only analyst following the company. With the market only predicted to deliver 39%, the company is positioned for a stronger earnings result.

With this information, we can see why Zhejiang Jinggong Integration Technology is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Zhejiang Jinggong Integration Technology's P/E?

Zhejiang Jinggong Integration Technology's P/E is flying high just like its stock has during the last month. 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 Zhejiang Jinggong Integration Technology'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. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Zhejiang Jinggong Integration Technology (1 is concerning!) that we have uncovered.

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.