Investors Aren't Entirely Convinced By Ningxia Jiaze Renewables Corporation Limited's (SHSE:601619) Earnings

Ningxia Jiaze Renewables Corporation Limited's (SHSE:601619) price-to-earnings (or "P/E") ratio of 12.1x might make it look like a strong buy right now compared to the market in China, where around half of the companies have P/E ratios above 33x and even P/E's above 62x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Ningxia Jiaze Renewables certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

Check out our latest analysis for Ningxia Jiaze Renewables

Want the full picture on analyst estimates for the company? Then our free report on Ningxia Jiaze Renewables will help you uncover what's on the horizon.

Is There Any Growth For Ningxia Jiaze Renewables?

In order to justify its P/E ratio, Ningxia Jiaze Renewables would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a decent 7.9% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 146% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 83% as estimated by the lone analyst watching the company. With the market only predicted to deliver 38%, the company is positioned for a stronger earnings result.

With this information, we find it odd that Ningxia Jiaze Renewables is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

Our examination of Ningxia Jiaze Renewables' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware Ningxia Jiaze Renewables is showing 2 warning signs in our investment analysis, 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.