There's No Escaping Opple Lighting Co.,LTD's (SHSE:603515) Muted Earnings Despite A 28% Share Price Rise

Opple Lighting Co.,LTD (SHSE:603515) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

Even after such a large jump in price, Opple LightingLTD may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 15x, since almost half of all companies in China have P/E ratios greater than 30x and even P/E's higher than 58x 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.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Opple LightingLTD has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

View our latest analysis for Opple LightingLTD

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

How Is Opple LightingLTD's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Opple LightingLTD's is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a worthy increase of 6.1%. However, this wasn't enough as the latest three year period has seen an unpleasant 6.2% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 6.7% per year as estimated by the six analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 19% each year, which is noticeably more attractive.

In light of this, it's understandable that Opple LightingLTD's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Despite Opple LightingLTD'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.

As we suspected, our examination of Opple LightingLTD's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Opple LightingLTD is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Opple LightingLTD'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.