TES Touch Embedded Solutions (Xiamen) Co., Ltd.'s (SZSE:003019) Share Price Boosted 27% But Its Business Prospects Need A Lift Too

TES Touch Embedded Solutions (Xiamen) Co., Ltd. (SZSE:003019) shareholders have had their patience rewarded with a 27% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 72% in the last year.

In spite of the firm bounce in price, TES Touch Embedded Solutions (Xiamen)'s price-to-earnings (or "P/E") ratio of 23.9x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 39x and even P/E's above 75x 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 limited.

Recent times have been quite advantageous for TES Touch Embedded Solutions (Xiamen) as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for TES Touch Embedded Solutions (Xiamen)

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on TES Touch Embedded Solutions (Xiamen) will help you shine a light on its historical performance.

Is There Any Growth For TES Touch Embedded Solutions (Xiamen)?

TES Touch Embedded Solutions (Xiamen)'s P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 52% last year. Pleasingly, EPS has also lifted 73% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 37% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that TES Touch Embedded Solutions (Xiamen)'s P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On TES Touch Embedded Solutions (Xiamen)'s P/E

The latest share price surge wasn't enough to lift TES Touch Embedded Solutions (Xiamen)'s P/E close to the market median. 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 TES Touch Embedded Solutions (Xiamen) maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with TES Touch Embedded Solutions (Xiamen).

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.