Shandong Yisheng Livestock & Poultry Breeding Co., Ltd. (SZSE:002458) Not Lagging Market On Growth Or Pricing

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 27x, you may consider Shandong Yisheng Livestock & Poultry Breeding Co., Ltd. (SZSE:002458) as a stock to avoid entirely with its 56.1x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times haven't been advantageous for Shandong Yisheng Livestock & Poultry Breeding as its earnings have been falling quicker than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Shandong Yisheng Livestock & Poultry Breeding

Keen to find out how analysts think Shandong Yisheng Livestock & Poultry Breeding's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Shandong Yisheng Livestock & Poultry Breeding's Growth Trending?

In order to justify its P/E ratio, Shandong Yisheng Livestock & Poultry Breeding would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 74% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 9.8% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 56% per annum over the next three years. With the market only predicted to deliver 19% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Shandong Yisheng Livestock & Poultry Breeding's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Shandong Yisheng Livestock & Poultry Breeding's P/E

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Shandong Yisheng Livestock & Poultry Breeding maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Shandong Yisheng Livestock & Poultry Breeding (including 1 which is a bit concerning).

If you're unsure about the strength of Shandong Yisheng Livestock & Poultry Breeding'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.