Shenzhen INVT Electric Co.,Ltd (SZSE:002334) Stock Catapults 27% Though Its Price And Business Still Lag The Market

Shenzhen INVT Electric Co.,Ltd (SZSE:002334) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 27% over that time.

In spite of the firm bounce in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 31x, you may still consider Shenzhen INVT ElectricLtd as an attractive investment with its 15.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Shenzhen INVT ElectricLtd has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Shenzhen INVT ElectricLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shenzhen INVT ElectricLtd.

How Is Shenzhen INVT ElectricLtd's Growth Trending?

In order to justify its P/E ratio, Shenzhen INVT ElectricLtd would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 128% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 24% as estimated by the dual analysts watching the company. With the market predicted to deliver 41% growth , the company is positioned for a weaker earnings result.

With this information, we can see why Shenzhen INVT ElectricLtd is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Shenzhen INVT ElectricLtd's P/E

The latest share price surge wasn't enough to lift Shenzhen INVT ElectricLtd's P/E close to the market median. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Shenzhen INVT ElectricLtd's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Shenzhen INVT ElectricLtd that you should be aware of.

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.

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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.