The Market Lifts Jilin OLED Material Tech Co., Ltd. (SHSE:688378) Shares 31% But It Can Do More

The Jilin OLED Material Tech Co., Ltd. (SHSE:688378) share price has done very well over the last month, posting an excellent gain of 31%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Jilin OLED Material Tech's price-to-earnings (or "P/E") ratio of 39.3x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 36x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been pleasing for Jilin OLED Material Tech as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Jilin OLED Material Tech

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How Is Jilin OLED Material Tech's Growth Trending?

In order to justify its P/E ratio, Jilin OLED Material Tech would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 24%. Still, incredibly EPS has fallen 34% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 104% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 41% growth forecast for the broader market.

In light of this, it's curious that Jilin OLED Material Tech's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Jilin OLED Material Tech's P/E?

Jilin OLED Material Tech appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

Our examination of Jilin OLED Material Tech's 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.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Jilin OLED Material Tech (2 make us uncomfortable!) that you should be aware of before investing here.

Of course, you might also be able to find a better stock than Jilin OLED Material Tech. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.