Shenzhen KSTAR Science and Technology Co., Ltd. (SZSE:002518) Stock Rockets 29% But Many Are Still Ignoring The Company

The Shenzhen KSTAR Science and Technology Co., Ltd. (SZSE:002518) share price has done very well over the last month, posting an excellent gain of 29%. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.3% in the last twelve months.

In spite of the firm bounce in price, Shenzhen KSTAR Science and Technology may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 28.1x, since almost half of all companies in China have P/E ratios greater than 33x and even P/E's higher than 64x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With earnings that are retreating more than the market's of late, Shenzhen KSTAR Science and Technology has been very sluggish. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. 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 Shenzhen KSTAR Science and Technology

Want the full picture on analyst estimates for the company? Then our free report on Shenzhen KSTAR Science and Technology will help you uncover what's on the horizon.

How Is Shenzhen KSTAR Science and Technology's Growth Trending?

In order to justify its P/E ratio, Shenzhen KSTAR Science and Technology would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 44% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 46% overall rise in EPS, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 36% over the next year. With the market predicted to deliver 38% growth , the company is positioned for a comparable earnings result.

In light of this, it's peculiar that Shenzhen KSTAR Science and Technology's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Shenzhen KSTAR Science and Technology's P/E?

Despite Shenzhen KSTAR Science and Technology's shares building up a head of steam, its P/E still lags most other companies. 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.

Our examination of Shenzhen KSTAR Science and Technology's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you take the next step, you should know about the 2 warning signs for Shenzhen KSTAR Science and Technology (1 is concerning!) that we have uncovered.

You might be able to find a better investment than Shenzhen KSTAR Science and Technology. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.