A Piece Of The Puzzle Missing From Sharetronic Data Technology Co., Ltd.'s (SZSE:300857) 34% Share Price Climb

Sharetronic Data Technology Co., Ltd. (SZSE:300857) shares have had a really impressive month, gaining 34% after a shaky period beforehand. The last month tops off a massive increase of 165% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Sharetronic Data Technology's P/E ratio of 31.8x, since the median price-to-earnings (or "P/E") ratio in China is also close to 30x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Sharetronic Data Technology certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Sharetronic Data Technology

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Sharetronic Data Technology will help you shine a light on its historical performance.

Does Growth Match The P/E?

Sharetronic Data Technology'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 175% gain to the company's bottom line. The latest three year period has also seen an excellent 309% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 36% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that Sharetronic Data Technology's P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Sharetronic Data Technology's P/E?

Its shares have lifted substantially and now Sharetronic Data Technology's P/E is also back up to the market median. 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 Sharetronic Data Technology currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Sharetronic Data Technology you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.