Shanghai Taisheng Wind Power Equipment Co., Ltd. (SZSE:300129) Doing What It Can To Lift Shares

It's not a stretch to say that Shanghai Taisheng Wind Power Equipment Co., Ltd.'s (SZSE:300129) price-to-earnings (or "P/E") ratio of 28.8x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 31x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

While the market has experienced earnings growth lately, Shanghai Taisheng Wind Power Equipment's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

See 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.

Does Growth Match The P/E?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 19%. The last three years don't look nice either as the company has shrunk EPS by 52% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 54% per year as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 25% per annum growth forecast for the broader market.

With this information, we find it interesting that Shanghai Taisheng Wind Power Equipment is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Shanghai Taisheng Wind Power Equipment's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

You need to take note of risks, for example - Shanghai Taisheng Wind Power Equipment has 2 warning signs (and 1 which is concerning) we think you should know about.

You might be able to find a better investment than Shanghai Taisheng Wind Power Equipment. 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.