Beijing Changjiu Logistics Co.,Ltd's (SHSE:603569) Popularity With Investors Is Clear

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 30x, you may consider Beijing Changjiu Logistics Co.,Ltd (SHSE:603569) as a stock to avoid entirely with its 53.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times have been advantageous for Beijing Changjiu LogisticsLtd as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Beijing Changjiu LogisticsLtd

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Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Beijing Changjiu LogisticsLtd's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 29%. Still, incredibly EPS has fallen 17% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 373% as estimated by the one analyst watching the company. With the market only predicted to deliver 39%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Beijing Changjiu LogisticsLtd's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

As we suspected, our examination of Beijing Changjiu LogisticsLtd'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. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Beijing Changjiu LogisticsLtd that you need to take into consideration.

Of course, you might also be able to find a better stock than Beijing Changjiu LogisticsLtd. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.