Hangzhou Heshun Technology Co.,LTD. (SZSE:301237) Looks Just Right With A 35% Price Jump

Those holding Hangzhou Heshun Technology Co.,LTD. (SZSE:301237) shares would be relieved that the share price has rebounded 35% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 39% over that time.

Following the firm bounce in price, Hangzhou Heshun TechnologyLTD's price-to-earnings (or "P/E") ratio of 60.3x might make it look like a strong sell right now compared to the market in China, where around half of the companies have P/E ratios below 29x and even P/E's below 18x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings that are retreating more than the market's of late, Hangzhou Heshun TechnologyLTD has been very sluggish. 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.

See our latest analysis for Hangzhou Heshun TechnologyLTD

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

How Is Hangzhou Heshun TechnologyLTD's Growth Trending?

Hangzhou Heshun 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 72% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 61% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 123% during the coming year according to the sole analyst following the company. With the market only predicted to deliver 41%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Hangzhou Heshun 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.

What We Can Learn From Hangzhou Heshun TechnologyLTD's P/E?

Shares in Hangzhou Heshun TechnologyLTD have built up some good momentum lately, which has really inflated its P/E. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Hangzhou Heshun TechnologyLTD 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.

It is also worth noting that we have found 4 warning signs for Hangzhou Heshun TechnologyLTD (2 are potentially serious!) that you need to take into consideration.

Of course, you might also be able to find a better stock than Hangzhou Heshun TechnologyLTD. 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.