Wintime Energy Group Co.,Ltd. (SHSE:600157) Surges 38% Yet Its Low P/E Is No Reason For Excitement

Wintime Energy Group Co.,Ltd. (SHSE:600157) shareholders would be excited to see that the share price has had a great month, posting a 38% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 5.8% isn't as impressive.

Even after such a large jump in price, Wintime Energy GroupLtd may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.3x, since almost half of all companies in China have P/E ratios greater than 34x and even P/E's higher than 64x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been pleasing for Wintime Energy GroupLtd as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Wintime Energy GroupLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Wintime Energy GroupLtd.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as depressed as Wintime Energy GroupLtd's is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings growth, the company posted a worthy increase of 14%. Still, lamentably EPS has fallen 50% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 14% each year over the next three years. With the market predicted to deliver 19% growth each year, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Wintime Energy GroupLtd's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Wintime Energy GroupLtd's recent share price jump still sees its P/E sitting firmly flat on the ground. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Wintime Energy GroupLtd's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Wintime Energy GroupLtd with six simple checks will allow you to discover any risks that could be an issue.

Of course, you might also be able to find a better stock than Wintime Energy GroupLtd. 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.