Investors Still Aren't Entirely Convinced By Anhui Truchum Advanced Materials and Technology Co., Ltd.'s (SZSE:002171) Earnings Despite 29% Price Jump

Anhui Truchum Advanced Materials and Technology Co., Ltd. (SZSE:002171) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 10% is also fairly reasonable.

Although its price has surged higher, it's still not a stretch to say that Anhui Truchum Advanced Materials and Technology's price-to-earnings (or "P/E") ratio of 28.8x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 32x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With earnings growth that's superior to most other companies of late, Anhui Truchum Advanced Materials and Technology has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Anhui Truchum Advanced Materials and Technology

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Anhui Truchum Advanced Materials and Technology.

How Is Anhui Truchum Advanced Materials and Technology's Growth Trending?

The only time you'd be comfortable seeing a P/E like Anhui Truchum Advanced Materials and Technology's is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company grew earnings per share by an impressive 32% last year. Pleasingly, EPS has also lifted 31% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 101% over the next year. With the market only predicted to deliver 39%, the company is positioned for a stronger earnings result.

In light of this, it's curious that Anhui Truchum Advanced Materials and Technology's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Its shares have lifted substantially and now Anhui Truchum Advanced Materials and Technology's P/E is also back up to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Anhui Truchum Advanced Materials and Technology's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Anhui Truchum Advanced Materials and Technology (including 1 which makes us a bit uncomfortable).

Of course, you might also be able to find a better stock than Anhui Truchum Advanced Materials and Technology. 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.