Pan Asian Microvent Tech (Jiangsu) Corporation (SHSE:688386) Shares Fly 26% But Investors Aren't Buying For Growth

Pan Asian Microvent Tech (Jiangsu) Corporation (SHSE:688386) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 37%.

Although its price has surged higher, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 39x, you may still consider Pan Asian Microvent Tech (Jiangsu) as an attractive investment with its 28.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

The earnings growth achieved at Pan Asian Microvent Tech (Jiangsu) over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Pan Asian Microvent Tech (Jiangsu)

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Pan Asian Microvent Tech (Jiangsu) will help you shine a light on its historical performance.

How Is Pan Asian Microvent Tech (Jiangsu)'s Growth Trending?

Pan Asian Microvent Tech (Jiangsu)'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 18% last year. The strong recent performance means it was also able to grow EPS by 53% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

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

In light of this, it's understandable that Pan Asian Microvent Tech (Jiangsu)'s P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Pan Asian Microvent Tech (Jiangsu)'s P/E

Pan Asian Microvent Tech (Jiangsu)'s stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Pan Asian Microvent Tech (Jiangsu) maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Pan Asian Microvent Tech (Jiangsu) you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.