Investors Aren't Entirely Convinced By Goldwind Science&Technology Co., Ltd.'s (SZSE:002202) Earnings

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 37x, you may consider Goldwind Science&Technology Co., Ltd. (SZSE:002202) as an attractive investment with its 26.7x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Goldwind Science&Technology has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Goldwind Science&Technology

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Goldwind Science&Technology.

How Is Goldwind Science&Technology's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Goldwind Science&Technology's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 64% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 56% overall. 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 twelve analysts covering the company suggest earnings should grow by 64% over the next year. With the market only predicted to deliver 39%, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Goldwind Science&Technology's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Goldwind Science&Technology's P/E

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 Goldwind Science&Technology currently trades on a much 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 significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Goldwind Science&Technology you should be aware of, and 1 of them can't be ignored.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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

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.