Some Keysino Separation Technology Inc. (SZSE:300899) Shareholders Look For Exit As Shares Take 49% Pounding

Keysino Separation Technology Inc. (SZSE:300899) shareholders won't be pleased to see that the share price has had a very rough month, dropping 49% and undoing the prior period's positive performance. The last month has meant the stock is now only up 2.9% during the last year.

Even after such a large drop in price, Keysino Separation Technology may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 69.2x, 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. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

For instance, Keysino Separation Technology's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

See our latest analysis for Keysino Separation Technology

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Keysino Separation Technology will help you shine a light on its historical performance.

How Is Keysino Separation Technology's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Keysino Separation Technology's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 36%. This means it has also seen a slide in earnings over the longer-term as EPS is down 72% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Comparing that to the market, which is predicted to deliver 41% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we find it concerning that Keysino Separation Technology is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Bottom Line On Keysino Separation Technology's P/E

Keysino Separation Technology's shares may have retreated, but its P/E is still flying high. 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.

We've established that Keysino Separation Technology currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Before you settle on your opinion, we've discovered 4 warning signs for Keysino Separation Technology (2 are significant!) that 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.