Stock Analysis

What Sharetronic Data Technology Co., Ltd.'s (SZSE:300857) 30% Share Price Gain Is Not Telling You

Published
SZSE:300857

Sharetronic Data Technology Co., Ltd. (SZSE:300857) shares have continued their recent momentum with a 30% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 69% in the last year.

Although its price has surged higher, there still wouldn't be many who think Sharetronic Data Technology's price-to-earnings (or "P/E") ratio of 34.5x is worth a mention when the median P/E in China is similar at about 36x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Sharetronic Data Technology certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, 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

SZSE:300857 Price to Earnings Ratio vs Industry December 2nd 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sharetronic Data Technology.

Does Growth Match The P/E?

In order to justify its P/E ratio, Sharetronic Data Technology would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 186% last year. The strong recent performance means it was also able to grow EPS by 335% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 3.5% as estimated by the dual analysts watching the company. With the market predicted to deliver 39% growth , the company is positioned for a weaker earnings result.

In light of this, it's curious that Sharetronic Data Technology's P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

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. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Sharetronic Data Technology's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

It is also worth noting that we have found 2 warning signs for Sharetronic Data Technology (1 is a bit unpleasant!) that you need to take into consideration.

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.