Stock Analysis

Sunrise Group Company Limited (SZSE:002752) Stock Catapults 28% Though Its Price And Business Still Lag The Market

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SZSE:002752

Sunrise Group Company Limited (SZSE:002752) shares have continued their recent momentum with a 28% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 37%.

Even after such a large jump in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 37x, you may still consider Sunrise Group as a highly attractive investment with its 17.1x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Sunrise Group has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. 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 Sunrise Group

SZSE:002752 Price to Earnings Ratio vs Industry December 17th 2024
Want the full picture on analyst estimates for the company? Then our free report on Sunrise Group will help you uncover what's on the horizon.

How Is Sunrise Group's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as depressed as Sunrise Group's is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 47%. The strong recent performance means it was also able to grow EPS by 115% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 25% during the coming year according to the only analyst following the company. Meanwhile, the rest of the market is forecast to expand by 38%, which is noticeably more attractive.

With this information, we can see why Sunrise Group is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Shares in Sunrise Group are going to need a lot more upward momentum to get the company's P/E out of its slump. 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.

As we suspected, our examination of Sunrise Group's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Sunrise Group that you should be aware 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.