Beijing Easpring Material Technology CO.,LTD. (SZSE:300073) Held Back By Insufficient Growth Even After Shares Climb 34%

Despite an already strong run, Beijing Easpring Material Technology CO.,LTD. (SZSE:300073) shares have been powering on, with a gain of 34% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 21% is also fairly reasonable.

Although its price has surged higher, Beijing Easpring Material TechnologyLTD's price-to-earnings (or "P/E") ratio of 30.5x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 37x and even P/E's above 73x are quite common. 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 earnings that are retreating more than the market's of late, Beijing Easpring Material TechnologyLTD 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. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Beijing Easpring Material TechnologyLTD

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beijing Easpring Material TechnologyLTD.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Beijing Easpring Material TechnologyLTD's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 61% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 6.1% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 8.5% over the next year. With the market predicted to deliver 41% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that Beijing Easpring Material TechnologyLTD's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Despite Beijing Easpring Material TechnologyLTD's shares building up a head of steam, its P/E still lags most other companies. 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 Beijing Easpring Material TechnologyLTD maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. 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.

Plus, you should also learn about these 3 warning signs we've spotted with Beijing Easpring Material TechnologyLTD (including 2 which can't be ignored).

You might be able to find a better investment than Beijing Easpring Material TechnologyLTD. 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).

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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.