Jiangsu Cnano Technology Co., Ltd.'s (SHSE:688116) Shares Leap 25% Yet They're Still Not Telling The Full Story

Jiangsu Cnano Technology Co., Ltd. (SHSE:688116) shares have continued their recent momentum with a 25% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 26% over that time.

Even after such a large jump in price, there still wouldn't be many who think Jiangsu Cnano Technology's price-to-earnings (or "P/E") ratio of 29.8x is worth a mention when the median P/E in China is similar at about 31x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Jiangsu Cnano Technology hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Jiangsu Cnano Technology

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

Is There Some Growth For Jiangsu Cnano Technology?

Jiangsu Cnano Technology's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 14%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 116% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 24% per annum as estimated by the six analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 20% per annum, which is noticeably less attractive.

With this information, we find it interesting that Jiangsu Cnano Technology is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Jiangsu Cnano Technology's P/E

Jiangsu Cnano Technology's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

Our examination of Jiangsu Cnano Technology's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Jiangsu Cnano Technology that you need to be mindful of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.