Earnings Not Telling The Story For Suzhou Kingswood Education Technology Co., Ltd. (SZSE:300192) After Shares Rise 26%

Suzhou Kingswood Education Technology Co., Ltd. (SZSE:300192) shares have continued their recent momentum with a 26% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 64%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Suzhou Kingswood Education Technology's P/E ratio of 39.1x, since the median price-to-earnings (or "P/E") ratio in China is also close to 36x. 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 its earnings growth in positive territory compared to the declining earnings of most other companies, Suzhou Kingswood Education Technology has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, 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 Suzhou Kingswood Education Technology

Want the full picture on analyst estimates for the company? Then our free report on Suzhou Kingswood Education Technology will help you uncover what's on the horizon.

Is There Some Growth For Suzhou Kingswood Education Technology?

The only time you'd be comfortable seeing a P/E like Suzhou Kingswood Education Technology's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 19%. Pleasingly, EPS has also lifted 105% 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.

Looking ahead now, EPS is anticipated to climb by 14% during the coming year according to the only analyst following the company. That's shaping up to be materially lower than the 38% growth forecast for the broader market.

In light of this, it's curious that Suzhou Kingswood Education Technology's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

What We Can Learn From Suzhou Kingswood Education Technology's P/E?

Suzhou Kingswood Education Technology appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Suzhou Kingswood Education Technology's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about these 2 warning signs we've spotted with Suzhou Kingswood Education Technology (including 1 which is a bit concerning).

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.