Shenyang Xingqi Pharmaceutical Co.,Ltd. (SZSE:300573) Stocks Pounded By 30% But Not Lagging Market On Growth Or Pricing

To the annoyance of some shareholders, Shenyang Xingqi Pharmaceutical Co.,Ltd. (SZSE:300573) shares are down a considerable 30% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

Even after such a large drop in price, Shenyang Xingqi PharmaceuticalLtd may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 42.8x, since almost half of all companies in China have P/E ratios under 26x and even P/E's lower than 16x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Shenyang Xingqi PharmaceuticalLtd has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Shenyang Xingqi PharmaceuticalLtd

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

How Is Shenyang Xingqi PharmaceuticalLtd's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Shenyang Xingqi PharmaceuticalLtd's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 76% last year. The latest three year period has also seen an excellent 91% overall rise in EPS, aided by its short-term performance. 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 three years should generate growth of 34% per annum as estimated by the lone analyst watching the company. With the market only predicted to deliver 20% per year, the company is positioned for a stronger earnings result.

With this information, we can see why Shenyang Xingqi PharmaceuticalLtd 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 Key Takeaway

A significant share price dive has done very little to deflate Shenyang Xingqi PharmaceuticalLtd's very lofty P/E. 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 Shenyang Xingqi PharmaceuticalLtd 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Shenyang Xingqi PharmaceuticalLtd (1 makes us a bit uncomfortable) you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.