The Price Is Right For Shenzhen Sunlord Electronics Co.,Ltd. (SZSE:002138)

With a median price-to-earnings (or "P/E") ratio of close to 27x in China, you could be forgiven for feeling indifferent about Shenzhen Sunlord Electronics Co.,Ltd.'s (SZSE:002138) P/E ratio of 25.5x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Shenzhen Sunlord ElectronicsLtd has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Shenzhen Sunlord ElectronicsLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shenzhen Sunlord ElectronicsLtd.

Does Growth Match The P/E?

Shenzhen Sunlord ElectronicsLtd's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered an exceptional 95% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 20% per year during the coming three years according to the eleven analysts following the company. With the market predicted to deliver 20% growth per year, the company is positioned for a comparable earnings result.

In light of this, it's understandable that Shenzhen Sunlord ElectronicsLtd's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

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.

We've established that Shenzhen Sunlord ElectronicsLtd maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Shenzhen Sunlord ElectronicsLtd that you should be aware of.

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.