Suzhou TZTEK Technology Co., Ltd's (SHSE:688003) P/E Is Still On The Mark Following 38% Share Price Bounce

Suzhou TZTEK Technology Co., Ltd (SHSE:688003) shareholders would be excited to see that the share price has had a great month, posting a 38% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 25% is also fairly reasonable.

Following the firm bounce in price, Suzhou TZTEK Technology's price-to-earnings (or "P/E") ratio of 41.7x might make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 32x and even P/E's below 19x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Suzhou TZTEK Technology 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 seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Suzhou TZTEK Technology

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

Does Growth Match The High P/E?

Suzhou TZTEK Technology's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered an exceptional 20% gain to the company's bottom line. The latest three year period has also seen an excellent 73% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 67% as estimated by the three analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 37%, which is noticeably less attractive.

With this information, we can see why Suzhou TZTEK Technology is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Suzhou TZTEK Technology's P/E

The large bounce in Suzhou TZTEK Technology's shares has lifted the company's P/E to a fairly high level. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Suzhou TZTEK Technology 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.

Before you settle on your opinion, we've discovered 1 warning sign for Suzhou TZTEK Technology that you should be aware of.

You might be able to find a better investment than Suzhou TZTEK Technology. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.