Xi'an Peri Power Semiconductor Converting Technology Co.,Ltd. (SZSE:300831) Stocks Shoot Up 27% But Its P/E Still Looks Reasonable

Xi'an Peri Power Semiconductor Converting Technology Co.,Ltd. (SZSE:300831) shareholders have had their patience rewarded with a 27% share price jump in the last month. Looking further back, the 19% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, Xi'an Peri Power Semiconductor Converting TechnologyLtd may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 73x, since almost half of all companies in China have P/E ratios under 29x and even P/E's lower than 18x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times have been quite advantageous for Xi'an Peri Power Semiconductor Converting TechnologyLtd as its earnings have been rising very briskly. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Xi'an Peri Power Semiconductor Converting TechnologyLtd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Xi'an Peri Power Semiconductor Converting TechnologyLtd will help you shine a light on its historical performance.

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

The only time you'd be truly comfortable seeing a P/E as steep as Xi'an Peri Power Semiconductor Converting TechnologyLtd's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 98%. The strong recent performance means it was also able to grow EPS by 217% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 36% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's understandable that Xi'an Peri Power Semiconductor Converting TechnologyLtd's P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Xi'an Peri Power Semiconductor Converting TechnologyLtd's P/E?

Xi'an Peri Power Semiconductor Converting TechnologyLtd's P/E is flying high just like its stock has during the last month. 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.

We've established that Xi'an Peri Power Semiconductor Converting TechnologyLtd maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Xi'an Peri Power Semiconductor Converting TechnologyLtd you should be aware of.

If these risks are making you reconsider your opinion on Xi'an Peri Power Semiconductor Converting TechnologyLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.