China Taiping Insurance Holdings Company Limited's (HKG:966) Shares Leap 29% Yet They're Still Not Telling The Full Story

China Taiping Insurance Holdings Company Limited (HKG:966) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 66% in the last year.

Even after such a large jump in price, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 13x, you may still consider China Taiping Insurance Holdings as an attractive investment with its 9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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China Taiping Insurance Holdings 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.

View our latest analysis for China Taiping Insurance Holdings

If you'd like to see what analysts are forecasting going forward, you should check out our free report on China Taiping Insurance Holdings.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as China Taiping Insurance Holdings' is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 36%. As a result, it also grew EPS by 21% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 13% each year as estimated by the eleven analysts watching the company. That's shaping up to be similar to the 15% per annum growth forecast for the broader market.

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

The Final Word

Despite China Taiping Insurance Holdings' shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that China Taiping Insurance Holdings currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for China Taiping Insurance Holdings with six simple checks on some of these key factors.

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.