Jiangsu King's Luck Brewery Joint-Stock Co.,Ltd.'s (SHSE:603369) Share Price Boosted 26% But Its Business Prospects Need A Lift Too

Jiangsu King's Luck Brewery Joint-Stock Co.,Ltd. (SHSE:603369) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 39x, you may still consider Jiangsu King's Luck Brewery Ltd as a highly attractive investment with its 19.1x 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.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Jiangsu King's Luck Brewery Ltd has been doing quite well of late. 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 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.

Check out our latest analysis for Jiangsu King's Luck Brewery Ltd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jiangsu King's Luck Brewery Ltd.

Is There Any Growth For Jiangsu King's Luck Brewery Ltd?

In order to justify its P/E ratio, Jiangsu King's Luck Brewery Ltd would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 17% last year. The strong recent performance means it was also able to grow EPS by 85% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 9.9% as estimated by the analysts watching the company. With the market predicted to deliver 37% growth , the company is positioned for a weaker earnings result.

With this information, we can see why Jiangsu King's Luck Brewery Ltd 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 Bottom Line On Jiangsu King's Luck Brewery Ltd's P/E

Jiangsu King's Luck Brewery Ltd's recent share price jump still sees its P/E sitting firmly flat on the ground. 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 Jiangsu King's Luck Brewery Ltd 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Jiangsu King's Luck Brewery Ltd (including 1 which is a bit unpleasant).

If these risks are making you reconsider your opinion on Jiangsu King's Luck Brewery Ltd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.