Shenzhen Capol International & Associatesco.,Ltd (SZSE:002949) Stock Rockets 27% But Many Are Still Ignoring The Company

Shenzhen Capol International & Associatesco.,Ltd (SZSE:002949) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 37%.

Even after such a large jump in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 38x, you may still consider Shenzhen Capol International & Associatesco.Ltd as an attractive investment with its 28.6x 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.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Shenzhen Capol International & Associatesco.Ltd has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Shenzhen Capol International & Associatesco.Ltd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shenzhen Capol International & Associatesco.Ltd.

Is There Any Growth For Shenzhen Capol International & Associatesco.Ltd?

The only time you'd be truly comfortable seeing a P/E as low as Shenzhen Capol International & Associatesco.Ltd'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 26% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 34% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 41% as estimated by the five analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 38%, which is not materially different.

In light of this, it's peculiar that Shenzhen Capol International & Associatesco.Ltd's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

Despite Shenzhen Capol International & Associatesco.Ltd's shares building up a head of steam, its P/E still lags most other companies. 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 Shenzhen Capol International & Associatesco.Ltd's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Shenzhen Capol International & Associatesco.Ltd 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.