State Power Rixin Technology Co., Ltd.'s (SZSE:301162) P/E Is Still On The Mark Following 37% Share Price Bounce

State Power Rixin Technology Co., Ltd. (SZSE:301162) shareholders would be excited to see that the share price has had a great month, posting a 37% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 28% over that time.

Since its price has surged higher, given close to half the companies in China have price-to-earnings ratios (or "P/E's") below 33x, you may consider State Power Rixin Technology as a stock to avoid entirely with its 52.2x P/E ratio. 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 pleasing for State Power Rixin Technology as its earnings have risen in spite of the market's earnings going into reverse. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for State Power Rixin Technology

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

How Is State Power Rixin Technology's Growth Trending?

State Power Rixin Technology's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a worthy increase of 8.7%. The solid recent performance means it was also able to grow EPS by 17% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Looking ahead now, EPS is anticipated to climb by 29% each year during the coming three years according to the twelve analysts following the company. With the market only predicted to deliver 18% per year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that State Power Rixin Technology'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 Bottom Line On State Power Rixin Technology's P/E

Shares in State Power Rixin Technology have built up some good momentum lately, which has really inflated its P/E. 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.

As we suspected, our examination of State Power Rixin Technology's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with State Power Rixin Technology.

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.