Market Participants Recognise Victory Giant Technology (HuiZhou)Co.,Ltd.'s (SZSE:300476) Earnings Pushing Shares 29% Higher

Victory Giant Technology (HuiZhou)Co.,Ltd. (SZSE:300476) shares have continued their recent momentum with a 29% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 65%.

Following the firm bounce in price, Victory Giant Technology (HuiZhou)Co.Ltd may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 34.5x, since almost half of all companies in China have P/E ratios under 29x and even P/E's lower than 18x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Victory Giant Technology (HuiZhou)Co.Ltd as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Victory Giant Technology (HuiZhou)Co.Ltd

Keen to find out how analysts think Victory Giant Technology (HuiZhou)Co.Ltd's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as high as Victory Giant Technology (HuiZhou)Co.Ltd's is when the company's growth is on track to outshine the market.

If we review the last year of earnings growth, the company posted a worthy increase of 6.8%. EPS has also lifted 15% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Looking ahead now, EPS is anticipated to climb by 28% per annum during the coming three years according to the four analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 21% each year, which is noticeably less attractive.

With this information, we can see why Victory Giant Technology (HuiZhou)Co.Ltd is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Victory Giant Technology (HuiZhou)Co.Ltd shares have received a push in the right direction, but its P/E is elevated too. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Victory Giant Technology (HuiZhou)Co.Ltd'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. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Victory Giant Technology (HuiZhou)Co.Ltd you should know about.

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.