Hunan TV & Broadcast Intermediary Co., Ltd. (SZSE:000917) Looks Just Right With A 28% Price Jump

The Hunan TV & Broadcast Intermediary Co., Ltd. (SZSE:000917) share price has done very well over the last month, posting an excellent gain of 28%. Unfortunately, despite the strong performance over the last month, the full year gain of 9.6% isn't as attractive.

Following the firm bounce in price, Hunan TV & Broadcast Intermediary's price-to-earnings (or "P/E") ratio of 47.6x 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. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times haven't been advantageous for Hunan TV & Broadcast Intermediary as its earnings have been falling quicker 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Hunan TV & Broadcast Intermediary

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Hunan TV & Broadcast Intermediary.

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

Hunan TV & Broadcast Intermediary'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.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 21%. 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 only analyst covering the company suggest earnings should grow by 55% over the next year. With the market only predicted to deliver 36%, the company is positioned for a stronger earnings result.

With this information, we can see why Hunan TV & Broadcast Intermediary is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Hunan TV & Broadcast Intermediary's P/E

Shares in Hunan TV & Broadcast Intermediary 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 Hunan TV & Broadcast Intermediary 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. Unless these conditions change, they will continue to provide strong support to the share price.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Hunan TV & Broadcast Intermediary with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.