Getting In Cheap On Bloomage BioTechnology Corporation Limited (SHSE:688363) Might Be Difficult

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 32x, you may consider Bloomage BioTechnology Corporation Limited (SHSE:688363) as a stock to avoid entirely with its 50x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Bloomage BioTechnology hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Bloomage BioTechnology

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

Is There Enough Growth For Bloomage BioTechnology?

In order to justify its P/E ratio, Bloomage BioTechnology would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 39% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 8.9% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 30% per annum as estimated by the twelve analysts watching the company. With the market only predicted to deliver 24% per annum, the company is positioned for a stronger earnings result.

With this information, we can see why Bloomage BioTechnology 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 Key Takeaway

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Bloomage BioTechnology 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Bloomage BioTechnology that you should be aware of.

If these risks are making you reconsider your opinion on Bloomage BioTechnology, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.