Further Upside For Shenzhen King Explorer Science and Technology Corporation (SZSE:002917) Shares Could Introduce Price Risks After 27% Bounce

Despite an already strong run, Shenzhen King Explorer Science and Technology Corporation (SZSE:002917) shares have been powering on, with a gain of 27% in the last thirty days. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Although its price has surged higher, there still wouldn't be many who think Shenzhen King Explorer Science and Technology's price-to-earnings (or "P/E") ratio of 32.8x is worth a mention when the median P/E in China is similar at about 32x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Shenzhen King Explorer Science and Technology certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

See our latest analysis for Shenzhen King Explorer Science and Technology

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shenzhen King Explorer Science and Technology.

Is There Some Growth For Shenzhen King Explorer Science and Technology?

Shenzhen King Explorer Science and 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.

Retrospectively, the last year delivered an exceptional 262% gain to the company's bottom line. EPS has also lifted 20% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 103% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 38% growth forecast for the broader market.

In light of this, it's curious that Shenzhen King Explorer Science 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 Bottom Line On Shenzhen King Explorer Science and Technology's P/E

Its shares have lifted substantially and now Shenzhen King Explorer Science and Technology's P/E is also back up to the market median. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Shenzhen King Explorer Science 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. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Having said that, be aware Shenzhen King Explorer Science and Technology is showing 1 warning sign in our investment analysis, you should know about.

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.