The Price Is Right For Zhejiang Jiemei Electronic And Technology Co., Ltd. (SZSE:002859)

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 29x, you may consider Zhejiang Jiemei Electronic And Technology Co., Ltd. (SZSE:002859) as a stock to potentially avoid with its 34.9x 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 as high as it is.

Zhejiang Jiemei Electronic And Technology certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Zhejiang Jiemei Electronic And Technology

Want the full picture on analyst estimates for the company? Then our free report on Zhejiang Jiemei Electronic And Technology will help you uncover what's on the horizon.

Is There Enough Growth For Zhejiang Jiemei Electronic And Technology?

In order to justify its P/E ratio, Zhejiang Jiemei Electronic And Technology would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered an exceptional 43% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 16% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 34% per year during the coming three years according to the seven analysts following the company. That's shaping up to be materially higher than the 25% each year growth forecast for the broader market.

With this information, we can see why Zhejiang Jiemei Electronic And Technology is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

We've established that Zhejiang Jiemei Electronic And Technology maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Zhejiang Jiemei Electronic And Technology is showing 1 warning sign in our investment analysis, you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com