Investors Appear Satisfied With Chongqing Mas Sci.&Tech.Co.,Ltd.'s (SZSE:300275) Prospects As Shares Rocket 38%

Those holding Chongqing Mas Sci.&Tech.Co.,Ltd. (SZSE:300275) shares would be relieved that the share price has rebounded 38% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 26% in the last twelve months.

Following the firm bounce in price, Chongqing Mas Sci.&Tech.Co.Ltd may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 57.5x, since almost half of all companies in China have P/E ratios under 29x and even P/E's lower than 18x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Chongqing Mas Sci.&Tech.Co.Ltd 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. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Chongqing Mas Sci.&Tech.Co.Ltd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Chongqing Mas Sci.&Tech.Co.Ltd.

Is There Enough Growth For Chongqing Mas Sci.&Tech.Co.Ltd?

Chongqing Mas Sci.&Tech.Co.Ltd's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 23% last year. The latest three year period has also seen an excellent 56% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 102% during the coming year according to the three analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 41%, which is noticeably less attractive.

In light of this, it's understandable that Chongqing Mas Sci.&Tech.Co.Ltd'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 Final Word

Shares in Chongqing Mas Sci.&Tech.Co.Ltd have built up some good momentum lately, which has really inflated its P/E. 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.

As we suspected, our examination of Chongqing Mas Sci.&Tech.Co.Ltd's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Chongqing Mas Sci.&Tech.Co.Ltd, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Chongqing Mas Sci.&Tech.Co.Ltd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.