Improved Earnings Required Before Oppein Home Group Inc. (SHSE:603833) Stock's 30% Jump Looks Justified

Oppein Home Group Inc. (SHSE:603833) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

Although its price has surged higher, Oppein Home Group may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.5x, since almost half of all companies in China have P/E ratios greater than 33x and even P/E's higher than 61x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been advantageous for Oppein Home Group 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for Oppein Home Group

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

Is There Any Growth For Oppein Home Group?

The only time you'd be truly comfortable seeing a P/E as depressed as Oppein Home Group's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 23% gain to the company's bottom line. EPS has also lifted 25% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 5.5% each year over the next three years. Meanwhile, the rest of the market is forecast to expand by 26% per annum, which is noticeably more attractive.

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

The Final Word

Shares in Oppein Home Group are going to need a lot more upward momentum to get the company's P/E out of its slump. 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 Oppein Home Group'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. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Oppein Home Group.

Of course, you might also be able to find a better stock than Oppein Home Group. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.