Integrity Technology Group Inc.'s (SHSE:688244) Share Price Is Still Matching Investor Opinion Despite 26% Slump

The Integrity Technology Group Inc. (SHSE:688244) share price has fared very poorly over the last month, falling by a substantial 26%. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

In spite of the heavy fall in price, Integrity Technology Group may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 79.5x, 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. 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.

Integrity Technology Group could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

See our latest analysis for Integrity Technology Group

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

How Is Integrity Technology Group's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Integrity Technology Group's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 51%. This means it has also seen a slide in earnings over the longer-term as EPS is down 49% 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 two analysts covering the company suggest earnings should grow by 297% over the next year. Meanwhile, the rest of the market is forecast to only expand by 36%, which is noticeably less attractive.

In light of this, it's understandable that Integrity Technology Group's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Integrity Technology Group's shares may have retreated, but its P/E is still flying high. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Integrity Technology Group 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 Integrity Technology Group (1 is a bit unpleasant) you should be aware of.

If these risks are making you reconsider your opinion on Integrity Technology Group, 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.