Shandong Xinjufeng Technology Packaging Co., Ltd. (SZSE:301296) Held Back By Insufficient Growth Even After Shares Climb 29%

Despite an already strong run, Shandong Xinjufeng Technology Packaging Co., Ltd. (SZSE:301296) shares have been powering on, with a gain of 29% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 11% over that time.

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 36x, you may still consider Shandong Xinjufeng Technology Packaging as an attractive investment with its 24.8x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been pleasing for Shandong Xinjufeng Technology Packaging as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Shandong Xinjufeng Technology Packaging

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shandong Xinjufeng Technology Packaging.

What Are Growth Metrics Telling Us About The Low P/E?

Shandong Xinjufeng Technology Packaging's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 13% last year. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 10% during the coming year according to the four analysts following the company. That's shaping up to be materially lower than the 40% growth forecast for the broader market.

With this information, we can see why Shandong Xinjufeng Technology Packaging is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Shandong Xinjufeng Technology Packaging's P/E

The latest share price surge wasn't enough to lift Shandong Xinjufeng Technology Packaging's P/E close to the market median. 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 Shandong Xinjufeng Technology Packaging maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Shandong Xinjufeng Technology Packaging with six simple checks will allow you to discover any risks that could be an issue.

Of course, you might also be able to find a better stock than Shandong Xinjufeng Technology Packaging. 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.