Shenzhen Fastprint Circuit Tech Co.,Ltd.'s (SZSE:002436) Share Price Matching Investor Opinion

Shenzhen Fastprint Circuit Tech Co.,Ltd.'s (SZSE:002436) price-to-earnings (or "P/E") ratio of 65.6x might make it look like a strong sell right now compared to the market in China, where around half of the companies have P/E ratios below 27x and even P/E's below 16x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

While the market has experienced earnings growth lately, Shenzhen Fastprint Circuit TechLtd's earnings have gone into reverse gear, which is not great. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

View our latest analysis for Shenzhen Fastprint Circuit TechLtd

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Is There Enough Growth For Shenzhen Fastprint Circuit TechLtd?

The only time you'd be truly comfortable seeing a P/E as steep as Shenzhen Fastprint Circuit TechLtd's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 37%. This means it has also seen a slide in earnings over the longer-term as EPS is down 65% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 51% per annum as estimated by the seven analysts watching the company. With the market only predicted to deliver 24% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Shenzhen Fastprint Circuit TechLtd 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 Shenzhen Fastprint Circuit TechLtd's P/E

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 Fastprint Circuit TechLtd 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 take the next step, you should know about the 3 warning signs for Shenzhen Fastprint Circuit TechLtd (2 are potentially serious!) that we have uncovered.

If you're unsure about the strength of Shenzhen Fastprint Circuit TechLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.

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