The Market Lifts Jiangsu Sinopep-Allsino Biopharmaceutical Co., Ltd. (SHSE:688076) Shares 25% But It Can Do More

Jiangsu Sinopep-Allsino Biopharmaceutical Co., Ltd. (SHSE:688076) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 11% is also fairly reasonable.

In spite of the firm bounce in price, Jiangsu Sinopep-Allsino Biopharmaceutical's price-to-earnings (or "P/E") ratio of 33.8x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 39x and even P/E's above 75x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Jiangsu Sinopep-Allsino Biopharmaceutical certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Jiangsu Sinopep-Allsino Biopharmaceutical

Keen to find out how analysts think Jiangsu Sinopep-Allsino Biopharmaceutical's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Jiangsu Sinopep-Allsino Biopharmaceutical's Growth Trending?

In order to justify its P/E ratio, Jiangsu Sinopep-Allsino Biopharmaceutical would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 145%. The strong recent performance means it was also able to grow EPS by 204% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 39% as estimated by the four analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 36%, which is not materially different.

In light of this, it's peculiar that Jiangsu Sinopep-Allsino Biopharmaceutical's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

The latest share price surge wasn't enough to lift Jiangsu Sinopep-Allsino Biopharmaceutical's P/E close to the market median. 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.

Our examination of Jiangsu Sinopep-Allsino Biopharmaceutical's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Jiangsu Sinopep-Allsino Biopharmaceutical with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Jiangsu Sinopep-Allsino Biopharmaceutical'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.