Sicher Elevator Co., Ltd. (SZSE:301056) Held Back By Insufficient Growth Even After Shares Climb 50%

Sicher Elevator Co., Ltd. (SZSE:301056) shares have had a really impressive month, gaining 50% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.5% in the last twelve months.

In spite of the firm bounce in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 34x, you may still consider Sicher Elevator as an attractive investment with its 23.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Sicher Elevator certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Sicher Elevator

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

Is There Any Growth For Sicher Elevator?

The only time you'd be truly comfortable seeing a P/E as low as Sicher Elevator's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 50% last year. 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.

Comparing that to the market, which is predicted to deliver 37% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why Sicher Elevator is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

Sicher Elevator's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Sicher Elevator revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Sicher Elevator that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.