Market Cool On Joeone Co.,Ltd's (SHSE:601566) Earnings

There wouldn't be many who think Joeone Co.,Ltd's (SHSE:601566) price-to-earnings (or "P/E") ratio of 29.2x is worth a mention when the median P/E in China is similar at about 30x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, JoeoneLtd has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for JoeoneLtd

Want the full picture on analyst estimates for the company? Then our free report on JoeoneLtd will help you uncover what's on the horizon.

Is There Some Growth For JoeoneLtd?

The only time you'd be comfortable seeing a P/E like JoeoneLtd's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 153%. However, this wasn't enough as the latest three year period has seen a very unpleasant 47% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 48% per annum as estimated by the three analysts watching the company. With the market only predicted to deliver 19% each year, the company is positioned for a stronger earnings result.

In light of this, it's curious that JoeoneLtd's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

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

Having said that, be aware JoeoneLtd is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of JoeoneLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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

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.