Further Upside For Shanghai Taisheng Wind Power Equipment Co., Ltd. (SZSE:300129) Shares Could Introduce Price Risks After 36% Bounce

Shanghai Taisheng Wind Power Equipment Co., Ltd. (SZSE:300129) shareholders have had their patience rewarded with a 36% share price jump in the last month. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 5.4% in the last twelve months.

Even after such a large jump in price, Shanghai Taisheng Wind Power Equipment may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 27.1x, since almost half of all companies in China have P/E ratios greater than 34x and even P/E's higher than 64x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Shanghai Taisheng Wind Power Equipment certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. 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.

View our latest analysis for Shanghai Taisheng Wind Power Equipment

Keen to find out how analysts think Shanghai Taisheng Wind Power Equipment's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Shanghai Taisheng Wind Power Equipment?

There's an inherent assumption that a company should underperform the market for P/E ratios like Shanghai Taisheng Wind Power Equipment's to be considered reasonable.

Retrospectively, the last year delivered a decent 3.7% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen an unpleasant 43% overall drop in EPS. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 43% per year as estimated by the seven analysts watching the company. That's shaping up to be materially higher than the 19% per annum growth forecast for the broader market.

In light of this, it's peculiar that Shanghai Taisheng Wind Power Equipment'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 Key Takeaway

Shanghai Taisheng Wind Power Equipment's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

Our examination of Shanghai Taisheng Wind Power Equipment's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Shanghai Taisheng Wind Power Equipment you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.