Market Might Still Lack Some Conviction On Yusys Technologies Co., Ltd. (SZSE:300674) Even After 25% Share Price Boost

Those holding Yusys Technologies Co., Ltd. (SZSE:300674) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Yusys Technologies' price-to-earnings (or "P/E") ratio of 30.4x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 30x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Yusys Technologies certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

See our latest analysis for Yusys Technologies

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Is There Some Growth For Yusys Technologies?

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

Retrospectively, the last year delivered an exceptional 29% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 34% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 31% each year over the next three years. With the market only predicted to deliver 22% per annum, the company is positioned for a stronger earnings result.

In light of this, it's curious that Yusys Technologies' P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Yusys Technologies appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

Our examination of Yusys Technologies' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Yusys Technologies you should know about.

If these risks are making you reconsider your opinion on Yusys Technologies, 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.