Market Participants Recognise Sinofibers Technology Co.,Ltd.'s (SZSE:300777) Earnings Pushing Shares 26% Higher

Despite an already strong run, Sinofibers Technology Co.,Ltd. (SZSE:300777) shares have been powering on, with a gain of 26% in the last thirty days. The last 30 days bring the annual gain to a very sharp 47%.

Since its price has surged higher, Sinofibers TechnologyLtd may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 58.7x, since almost half of all companies in China have P/E ratios under 38x and even P/E's lower than 21x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Sinofibers TechnologyLtd has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Sinofibers TechnologyLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sinofibers TechnologyLtd.

Is There Enough Growth For Sinofibers TechnologyLtd?

Sinofibers TechnologyLtd's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered a frustrating 48% decrease to the company's bottom line. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 43% over the next year. Meanwhile, the rest of the market is forecast to only expand by 37%, which is noticeably less attractive.

In light of this, it's understandable that Sinofibers TechnologyLtd's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Shares in Sinofibers TechnologyLtd have built up some good momentum lately, which has really inflated its P/E. 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.

As we suspected, our examination of Sinofibers TechnologyLtd's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Sinofibers TechnologyLtd.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.