LONGi Green Energy Technology Co., Ltd.'s (SHSE:601012) Shares Not Telling The Full Story

It's not a stretch to say that LONGi Green Energy Technology Co., Ltd.'s (SHSE:601012) price-to-earnings (or "P/E") ratio of 29.6x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 31x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

LONGi Green Energy Technology could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for LONGi Green Energy Technology

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Is There Some Growth For LONGi Green Energy Technology?

LONGi Green Energy Technology's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered a frustrating 70% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 49% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 35% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 25% per year, which is noticeably less attractive.

With this information, we find it interesting that LONGi Green Energy Technology is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that LONGi Green Energy Technology currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Plus, you should also learn about these 3 warning signs we've spotted with LONGi Green Energy Technology (including 1 which is a bit concerning).

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.