Jiangyin Jianghua Microelectronics Materials Co., Ltd (SHSE:603078) Looks Just Right With A 34% Price Jump

Those holding Jiangyin Jianghua Microelectronics Materials Co., Ltd (SHSE:603078) shares would be relieved that the share price has rebounded 34% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 25% in the last twelve months.

Following the firm bounce in price, Jiangyin Jianghua Microelectronics Materials' price-to-earnings (or "P/E") ratio of 41.9x might make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 29x and even P/E's below 18x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

There hasn't been much to differentiate Jiangyin Jianghua Microelectronics Materials' and the market's retreating earnings lately. It might be that many expect the company's earnings to strengthen positively despite the tough market conditions, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Jiangyin Jianghua Microelectronics Materials

Keen to find out how analysts think Jiangyin Jianghua Microelectronics Materials' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For Jiangyin Jianghua Microelectronics Materials?

Jiangyin Jianghua Microelectronics Materials' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered a frustrating 2.6% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 115% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 60% during the coming year according to the three analysts following the company. With the market only predicted to deliver 41%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Jiangyin Jianghua Microelectronics Materials' 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 Final Word

Jiangyin Jianghua Microelectronics Materials' P/E is getting right up there since its shares have risen strongly. 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.

We've established that Jiangyin Jianghua Microelectronics Materials 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.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Jiangyin Jianghua Microelectronics Materials with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than Jiangyin Jianghua Microelectronics Materials. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.