Up-shine Lighting Co., Limited's (SZSE:301362) Shares Bounce 26% But Its Business Still Trails The Market

Up-shine Lighting Co., Limited (SZSE:301362) shareholders have had their patience rewarded with a 26% share price jump in the last month. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.9% in the last twelve months.

Although its price has surged higher, Up-shine Lighting may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 18.1x, since almost half of all companies in China have P/E ratios greater than 35x and even P/E's higher than 67x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Up-shine Lighting has been struggling lately as its earnings have declined faster than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

Check out our latest analysis for Up-shine Lighting

Keen to find out how analysts think Up-shine Lighting's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Up-shine Lighting?

In order to justify its P/E ratio, Up-shine Lighting would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 22%. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the sole analyst covering the company suggest earnings should grow by 18% over the next year. With the market predicted to deliver 37% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that Up-shine Lighting's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Up-shine Lighting's P/E?

The latest share price surge wasn't enough to lift Up-shine Lighting's P/E close to the market median. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Up-shine Lighting's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Up-shine Lighting with six simple checks on some of these key factors.

If you're unsure about the strength of Up-shine Lighting'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.