After Leaping 26% OPT Machine Vision Tech Co., Ltd. (SHSE:688686) Shares Are Not Flying Under The Radar

The OPT Machine Vision Tech Co., Ltd. (SHSE:688686) share price has done very well over the last month, posting an excellent gain of 26%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 34% in the last twelve months.

Since its price has surged higher, OPT Machine Vision Tech may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 71.4x, since almost half of all companies in China have P/E ratios under 36x and even P/E's lower than 21x 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.

Recent times haven't been advantageous for OPT Machine Vision Tech as its earnings have been falling quicker than most other companies. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for OPT Machine Vision Tech

Keen to find out how analysts think OPT Machine Vision Tech's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The High P/E?

In order to justify its P/E ratio, OPT Machine Vision Tech would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 52% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 60% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 98% during the coming year according to the eight analysts following the company. With the market only predicted to deliver 41%, the company is positioned for a stronger earnings result.

With this information, we can see why OPT Machine Vision Tech 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.

What We Can Learn From OPT Machine Vision Tech's P/E?

The strong share price surge has got OPT Machine Vision Tech's P/E rushing to great heights as well. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of OPT Machine Vision Tech'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. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with OPT Machine Vision Tech.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.