Stock Analysis

Impulse (Qingdao) Health Tech Co.,Ltd. (SZSE:002899) Soars 37% But It's A Story Of Risk Vs Reward

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Impulse (Qingdao) Health Tech Co.,Ltd. (SZSE:002899) shareholders are no doubt pleased to see that the share price has bounced 37% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

Although its price has surged higher, Impulse (Qingdao) Health TechLtd may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.4x, since almost half of all companies in China have P/E ratios greater than 30x and even P/E's higher than 55x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Recent times have been quite advantageous for Impulse (Qingdao) Health TechLtd as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Impulse (Qingdao) Health TechLtd

SZSE:002899 Price to Earnings Ratio vs Industry March 9th 2024
Although there are no analyst estimates available for Impulse (Qingdao) Health TechLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Impulse (Qingdao) Health TechLtd?

The only time you'd be truly comfortable seeing a P/E as depressed as Impulse (Qingdao) Health TechLtd's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 443% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 193% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

It's interesting to note that the rest of the market is similarly expected to grow by 41% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Impulse (Qingdao) Health TechLtd's P/E sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

Even after such a strong price move, Impulse (Qingdao) Health TechLtd's P/E still trails the rest of the market significantly. 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.

Our examination of Impulse (Qingdao) Health TechLtd revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching the company's performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Impulse (Qingdao) Health TechLtd with six simple checks will allow you to discover any risks that could be an issue.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Valuation is complex, but we're helping make it simple.

Find out whether Impulse (Qingdao) Health TechLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.