Bide Pharmatech Co., Ltd. (SHSE:688073) Stocks Shoot Up 26% But Its P/E Still Looks Reasonable

Bide Pharmatech Co., Ltd. (SHSE:688073) shares have continued their recent momentum with a 26% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 33% over that time.

Since its price has surged higher, Bide Pharmatech's price-to-earnings (or "P/E") ratio of 47x might make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 35x and even P/E's below 20x 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 as high as it is.

With earnings that are retreating more than the market's of late, Bide Pharmatech has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

See our latest analysis for Bide Pharmatech

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

How Is Bide Pharmatech's Growth Trending?

Bide Pharmatech's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 59%. This means it has also seen a slide in earnings over the longer-term as EPS is down 38% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 73% during the coming year according to the dual analysts following the company. With the market only predicted to deliver 40%, the company is positioned for a stronger earnings result.

With this information, we can see why Bide Pharmatech is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Bide Pharmatech's P/E is getting right up there since its shares have risen strongly. 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.

As we suspected, our examination of Bide Pharmatech'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.

You need to take note of risks, for example - Bide Pharmatech has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

If you're unsure about the strength of Bide Pharmatech's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.