Earnings Not Telling The Story For Jiangsu Leili Motor Co., Ltd (SZSE:300660) After Shares Rise 28%

Jiangsu Leili Motor Co., Ltd (SZSE:300660) shares have continued their recent momentum with a 28% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 12% is also fairly reasonable.

Although its price has surged higher, it's still not a stretch to say that Jiangsu Leili Motor's price-to-earnings (or "P/E") ratio of 37.3x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 36x. 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.

Recent times have been pleasing for Jiangsu Leili Motor 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 deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Jiangsu Leili Motor

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Is There Some Growth For Jiangsu Leili Motor?

The only time you'd be comfortable seeing a P/E like Jiangsu Leili Motor's is when the company's growth is tracking the market closely.

If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period was better as it's delivered a decent 8.5% overall rise in EPS. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 35% during the coming year according to the three analysts following the company. That's shaping up to be materially lower than the 39% growth forecast for the broader market.

In light of this, it's curious that Jiangsu Leili Motor's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

What We Can Learn From Jiangsu Leili Motor's P/E?

Its shares have lifted substantially and now Jiangsu Leili Motor's P/E is also back up to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Jiangsu Leili Motor's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about these 2 warning signs we've spotted with Jiangsu Leili Motor.

If you're unsure about the strength of Jiangsu Leili Motor's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.