Investors Interested In Suzhou Anjie Technology Co., Ltd.'s (SZSE:002635) Earnings

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 32x, you may consider Suzhou Anjie Technology Co., Ltd. (SZSE:002635) as a stock to potentially avoid with its 40.2x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Suzhou Anjie Technology hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Suzhou Anjie Technology

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

Does Growth Match The High P/E?

In order to justify its P/E ratio, Suzhou Anjie Technology would need to produce impressive growth in excess of the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 24%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to climb by 74% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 40% growth forecast for the broader market.

In light of this, it's understandable that Suzhou Anjie Technology's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Suzhou Anjie Technology's P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Suzhou Anjie Technology maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with Suzhou Anjie Technology.

If you're unsure about the strength of Suzhou Anjie Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.