Beijing Strong Biotechnologies,Inc. (SZSE:300406) Stock Rockets 27% But Many Are Still Ignoring The Company

Beijing Strong Biotechnologies,Inc. (SZSE:300406) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 16% over that time.

In spite of the firm bounce in price, Beijing Strong BiotechnologiesInc's price-to-earnings (or "P/E") ratio of 18.3x 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 37x and even P/E's above 71x 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 limited.

Recent times have been pleasing for Beijing Strong BiotechnologiesInc 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 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 Beijing Strong BiotechnologiesInc

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

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Beijing Strong BiotechnologiesInc would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 6.8% last year. This was backed up an excellent period prior to see EPS up by 62% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 39% during the coming year according to the only analyst following the company. That's shaping up to be similar to the 37% growth forecast for the broader market.

In light of this, it's peculiar that Beijing Strong BiotechnologiesInc's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Beijing Strong BiotechnologiesInc's P/E?

Beijing Strong BiotechnologiesInc's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Beijing Strong BiotechnologiesInc currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Beijing Strong BiotechnologiesInc.

You might be able to find a better investment than Beijing Strong BiotechnologiesInc. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.