Aerospace Intelligent Manufacturing Technology Co., Ltd. (SZSE:300446) Shares Fly 30% But Investors Aren't Buying For Growth

Those holding Aerospace Intelligent Manufacturing Technology Co., Ltd. (SZSE:300446) shares would be relieved that the share price has rebounded 30% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking further back, the 11% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

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 28x, you may still consider Aerospace Intelligent Manufacturing Technology as an attractive investment with its 22.1x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Aerospace Intelligent Manufacturing Technology certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Aerospace Intelligent Manufacturing Technology

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Aerospace Intelligent Manufacturing Technology's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Aerospace Intelligent Manufacturing Technology would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 95% last year. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 35% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Aerospace Intelligent Manufacturing Technology's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

Aerospace Intelligent Manufacturing Technology's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

As we suspected, our examination of Aerospace Intelligent Manufacturing Technology revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Aerospace Intelligent Manufacturing Technology that you need to be mindful of.

Of course, you might also be able to find a better stock than Aerospace Intelligent Manufacturing 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.

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