Wus Printed Circuit (Kunshan) Co., Ltd.'s (SZSE:002463) Share Price Could Signal Some Risk

Wus Printed Circuit (Kunshan) Co., Ltd.'s (SZSE:002463) price-to-earnings (or "P/E") ratio of 38.6x might make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 29x and even P/E's below 17x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

With earnings growth that's superior to most other companies of late, Wus Printed Circuit (Kunshan) has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Wus Printed Circuit (Kunshan)

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Wus Printed Circuit (Kunshan).

How Is Wus Printed Circuit (Kunshan)'s Growth Trending?

Wus Printed Circuit (Kunshan)'s P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered an exceptional 38% gain to the company's bottom line. The latest three year period has also seen an excellent 33% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 20% each year during the coming three years according to the analysts following the company. With the market predicted to deliver 25% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's alarming that Wus Printed Circuit (Kunshan)'s P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

The Bottom Line On Wus Printed Circuit (Kunshan)'s P/E

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.

We've established that Wus Printed Circuit (Kunshan) currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Before you settle on your opinion, we've discovered 1 warning sign for Wus Printed Circuit (Kunshan) that you should be aware of.

If these risks are making you reconsider your opinion on Wus Printed Circuit (Kunshan), explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com