Yangzhou Yangjie Electronic Technology Co., Ltd.'s (SZSE:300373) Business Is Trailing The Market But Its Shares Aren't

There wouldn't be many who think Yangzhou Yangjie Electronic Technology Co., Ltd.'s (SZSE:300373) price-to-earnings (or "P/E") ratio of 27.9x is worth a mention when the median P/E in China is similar at about 29x. 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.

Yangzhou Yangjie Electronic Technology has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is moderate because investors think the company's earnings trend will eventually fall in line with most others in the market. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders may be a little nervous about the viability of the share price.

View our latest analysis for Yangzhou Yangjie Electronic Technology

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Yangzhou Yangjie Electronic Technology.

How Is Yangzhou Yangjie Electronic Technology's Growth Trending?

The only time you'd be comfortable seeing a P/E like Yangzhou Yangjie Electronic Technology's is when the company's growth is tracking the market closely.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 35%. Still, the latest three year period has seen an excellent 93% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 26% during the coming year according to the four analysts following the company. Meanwhile, the rest of the market is forecast to expand by 41%, which is noticeably more attractive.

With this information, we find it interesting that Yangzhou Yangjie Electronic Technology is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Bottom Line On Yangzhou Yangjie Electronic Technology's P/E

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.

Our examination of Yangzhou Yangjie Electronic Technology's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about these 2 warning signs we've spotted with Yangzhou Yangjie Electronic Technology.

Of course, you might also be able to find a better stock than Yangzhou Yangjie Electronic Technology. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.