CNOOC Energy Technology & Services Limited (SHSE:600968) Stock Catapults 26% Though Its Price And Business Still Lag The Market

CNOOC Energy Technology & Services Limited (SHSE:600968) shares have continued their recent momentum with a 26% gain in the last month alone. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may still consider CNOOC Energy Technology & Services as an attractive investment with its 15.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

CNOOC Energy Technology & Services certainly has been doing a good job lately as it's been growing earnings more 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.

See our latest analysis for CNOOC Energy Technology & Services

Want the full picture on analyst estimates for the company? Then our free report on CNOOC Energy Technology & Services will help you uncover what's on the horizon.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, CNOOC Energy Technology & Services would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 53% last year. Pleasingly, EPS has also lifted 91% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 18% over the next year. With the market predicted to deliver 36% growth , the company is positioned for a weaker earnings result.

With this information, we can see why CNOOC Energy Technology & Services 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

Despite CNOOC Energy Technology & Services' shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that CNOOC Energy Technology & Services 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.

You always need to take note of risks, for example - CNOOC Energy Technology & Services has 1 warning sign we think you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.