Investors Still Aren't Entirely Convinced By Jinko Power Technology Co., Ltd.'s (SHSE:601778) Earnings Despite 36% Price Jump

Despite an already strong run, Jinko Power Technology Co., Ltd. (SHSE:601778) shares have been powering on, with a gain of 36% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

Although its price has surged higher, there still wouldn't be many who think Jinko Power Technology's price-to-earnings (or "P/E") ratio of 33.4x is worth a mention when the median P/E in China is similar at about 34x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Jinko Power Technology has been doing quite well of late. 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 Jinko Power Technology

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jinko Power Technology.

Does Growth Match The P/E?

In order to justify its P/E ratio, Jinko Power 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 29% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 38% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 39% each year over the next three years. That's shaping up to be materially higher than the 19% per annum growth forecast for the broader market.

In light of this, it's curious that Jinko Power Technology's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Jinko Power Technology's P/E

Jinko Power Technology's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Jinko Power Technology's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Jinko Power Technology.

You might be able to find a better investment than Jinko Power Technology. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.