Zhejiang Entive Smart Kitchen Appliance Co., Ltd.'s (SZSE:300911) Share Price Boosted 29% But Its Business Prospects Need A Lift Too

Those holding Zhejiang Entive Smart Kitchen Appliance Co., Ltd. (SZSE:300911) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

In spite of the firm bounce in price, Zhejiang Entive Smart Kitchen Appliance may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14x, 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Recent times have been pleasing for Zhejiang Entive Smart Kitchen Appliance as its earnings have risen in spite of the market's earnings going into reverse. 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.

Check out our latest analysis for Zhejiang Entive Smart Kitchen Appliance

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zhejiang Entive Smart Kitchen Appliance.

Is There Any Growth For Zhejiang Entive Smart Kitchen Appliance?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Zhejiang Entive Smart Kitchen Appliance's to be considered reasonable.

Retrospectively, the last year delivered a decent 3.5% gain to the company's bottom line. The solid recent performance means it was also able to grow EPS by 22% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 14% during the coming year according to the nine analysts following the company. Meanwhile, the rest of the market is forecast to expand by 41%, which is noticeably more attractive.

With this information, we can see why Zhejiang Entive Smart Kitchen Appliance is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Zhejiang Entive Smart Kitchen Appliance's recent share price jump still sees its P/E sitting firmly flat on the ground. 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.

We've established that Zhejiang Entive Smart Kitchen Appliance maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Zhejiang Entive Smart Kitchen Appliance (of which 1 can't be ignored!) you should know about.

Of course, you might also be able to find a better stock than Zhejiang Entive Smart Kitchen Appliance. 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.