Nanjing Medlander Medical Technology Co.,Ltd. (SHSE:688273) Held Back By Insufficient Growth Even After Shares Climb 25%

Nanjing Medlander Medical Technology Co.,Ltd. (SHSE:688273) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 24% is also fairly reasonable.

Even after such a large jump in price, Nanjing Medlander Medical TechnologyLtd's price-to-earnings (or "P/E") ratio of 29.2x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 39x and even P/E's above 76x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Earnings have risen firmly for Nanjing Medlander Medical TechnologyLtd recently, which is pleasing to see. It might be that many expect the respectable 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.

Check out our latest analysis for Nanjing Medlander Medical TechnologyLtd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Nanjing Medlander Medical TechnologyLtd will help you shine a light on its historical performance.

What Are Growth Metrics Telling Us About The Low P/E?

Nanjing Medlander Medical TechnologyLtd'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.

Taking a look back first, we see that the company grew earnings per share by an impressive 15% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 34% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 37% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we are not surprised that Nanjing Medlander Medical TechnologyLtd is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

What We Can Learn From Nanjing Medlander Medical TechnologyLtd's P/E?

Despite Nanjing Medlander Medical TechnologyLtd's shares building up a head of steam, its P/E still lags most other companies. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Nanjing Medlander Medical TechnologyLtd revealed its shrinking earnings over the medium-term are contributing to its low P/E, given the market is set to grow. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for Nanjing Medlander Medical TechnologyLtd that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.