Oppein Home Group Inc. (SHSE:603833) Shares Fly 49% But Investors Aren't Buying For Growth

Oppein Home Group Inc. (SHSE:603833) shares have had a really impressive month, gaining 49% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 35% 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 Oppein Home Group as a highly attractive investment with its 13.1x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Oppein Home Group certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. 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.

View our latest analysis for Oppein Home Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Oppein Home Group.

How Is Oppein Home Group's Growth Trending?

In order to justify its P/E ratio, Oppein Home Group would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a worthy increase of 3.0%. The latest three year period has also seen a 11% overall rise in EPS, aided somewhat by its short-term performance. 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 3.8% per annum over the next three years. That's shaping up to be materially lower than the 19% per year growth forecast for the broader market.

In light of this, it's understandable that Oppein Home Group'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.

The Bottom Line On Oppein Home Group's P/E

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. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Oppein Home Group you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.