OPT Machine Vision Tech Co., Ltd.'s (SHSE:688686) P/E Is Still On The Mark Following 26% Share Price Bounce

OPT Machine Vision Tech Co., Ltd. (SHSE:688686) shares have continued their recent momentum with a 26% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 29% 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 35x, you may consider OPT Machine Vision Tech as a stock to avoid entirely with its 78.2x 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.

OPT Machine Vision Tech has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.

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.

How Is OPT Machine Vision Tech's Growth Trending?

OPT Machine Vision Tech'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.

Retrospectively, the last year delivered a frustrating 52% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 60% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 93% during the coming year according to the nine analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 38%, which is noticeably less attractive.

With this information, we can see why OPT Machine Vision Tech is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On 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. 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 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. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for OPT Machine Vision Tech that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.