Suzhou Shijing Environmental Technology Co.,Ltd. (SZSE:301030) Might Not Be As Mispriced As It Looks

Suzhou Shijing Environmental Technology Co.,Ltd.'s (SZSE:301030) price-to-earnings (or "P/E") ratio of 22.1x might 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 30x and even P/E's above 57x 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 advantageous for Suzhou Shijing Environmental TechnologyLtd as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Suzhou Shijing Environmental TechnologyLtd

Keen to find out how analysts think Suzhou Shijing Environmental TechnologyLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Suzhou Shijing Environmental TechnologyLtd?

Suzhou Shijing Environmental TechnologyLtd's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 107% last year. The strong recent performance means it was also able to grow EPS by 147% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 101% each year as estimated by the one analyst watching the company. With the market only predicted to deliver 25% per year, the company is positioned for a stronger earnings result.

With this information, we find it odd that Suzhou Shijing Environmental TechnologyLtd is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Suzhou Shijing Environmental TechnologyLtd's 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.

Our examination of Suzhou Shijing Environmental TechnologyLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near 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 significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Suzhou Shijing Environmental TechnologyLtd (of which 2 can't be ignored!) you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com