Even With A 38% Surge, Cautious Investors Are Not Rewarding Maccura Biotechnology Co.Ltd's (SZSE:300463) Performance Completely

Maccura Biotechnology Co.Ltd (SZSE:300463) shareholders have had their patience rewarded with a 38% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 9.6% isn't as attractive.

Even after such a large jump in price, Maccura BiotechnologyLtd's price-to-earnings (or "P/E") ratio of 28.9x 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 34x and even P/E's above 64x 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.

Recent times haven't been advantageous for Maccura BiotechnologyLtd as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Maccura BiotechnologyLtd

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

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

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

Retrospectively, the last year delivered a frustrating 29% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 69% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 25% per year over the next three years. With the market only predicted to deliver 19% each year, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Maccura BiotechnologyLtd's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Maccura BiotechnologyLtd's P/E?

Maccura BiotechnologyLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Maccura BiotechnologyLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware Maccura BiotechnologyLtd is showing 1 warning sign in our investment analysis, you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.