Xuzhou Handler Special Vehicle Co., Ltd (SZSE:300201) Surges 48% Yet Its Low P/E Is No Reason For Excitement

Despite an already strong run, Xuzhou Handler Special Vehicle Co., Ltd (SZSE:300201) shares have been powering on, with a gain of 48% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 25% is also fairly reasonable.

In spite of the firm bounce in price, Xuzhou Handler Special Vehicle's price-to-earnings (or "P/E") ratio of 28.2x 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 74x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been pleasing for Xuzhou Handler Special Vehicle as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for Xuzhou Handler Special Vehicle

Keen to find out how analysts think Xuzhou Handler Special Vehicle's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Xuzhou Handler Special Vehicle?

In order to justify its P/E ratio, Xuzhou Handler Special Vehicle would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 53% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 34% over the next year. Meanwhile, the rest of the market is forecast to expand by 40%, which is noticeably more attractive.

With this information, we can see why Xuzhou Handler Special Vehicle is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Xuzhou Handler Special Vehicle's P/E?

The latest share price surge wasn't enough to lift Xuzhou Handler Special Vehicle's P/E close to the market median. 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.

As we suspected, our examination of Xuzhou Handler Special Vehicle's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Xuzhou Handler Special Vehicle, and understanding them should be part of your investment process.

You might be able to find a better investment than Xuzhou Handler Special Vehicle. 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.