Jinxin Fertility Group Limited's (HKG:1951) 30% Jump Shows Its Popularity With Investors

Jinxin Fertility Group Limited (HKG:1951) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 16% in the last twelve months.

Following the firm bounce in price, Jinxin Fertility Group may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 24.9x, since almost half of all companies in Hong Kong have P/E ratios under 9x and even P/E's lower than 5x are not unusual. 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 Jinxin Fertility Group 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Jinxin Fertility Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jinxin Fertility Group.

Does Growth Match The High P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 94% last year. Still, incredibly EPS has fallen 5.4% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 25% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 12% each year, which is noticeably less attractive.

In light of this, it's understandable that Jinxin Fertility Group's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Jinxin Fertility Group's P/E?

Jinxin Fertility Group's P/E is flying high just like its stock has during the last month. 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.

We've established that Jinxin Fertility Group maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Jinxin Fertility Group with six simple checks.

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.