Improved Earnings Required Before MotoMotion China Corporation (SZSE:301061) Stock's 26% Jump Looks Justified

MotoMotion China Corporation (SZSE:301061) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 64% in the last year.

Although its price has surged higher, MotoMotion China may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 21.9x, since almost half of all companies in China have P/E ratios greater than 33x and even P/E's higher than 63x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been pleasing for MotoMotion China as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for MotoMotion China

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

Is There Any Growth For MotoMotion China?

MotoMotion China's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 29%. Pleasingly, EPS has also lifted 34% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 19% during the coming year according to the nine analysts following the company. With the market predicted to deliver 38% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that MotoMotion China's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On MotoMotion China's P/E

Despite MotoMotion China's shares building up a head of steam, its P/E still lags most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that MotoMotion China maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for MotoMotion China with six simple checks on some of these key factors.

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

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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.