Lingbao Gold Group Company Ltd. (HKG:3330) Stock Rockets 33% But Many Are Still Ignoring The Company

The Lingbao Gold Group Company Ltd. (HKG:3330) share price has done very well over the last month, posting an excellent gain of 33%. The last 30 days were the cherry on top of the stock's 379% gain in the last year, which is nothing short of spectacular.

Even after such a large jump in price, it's still not a stretch to say that Lingbao Gold Group's price-to-earnings (or "P/E") ratio of 13.8x right now seems quite "middle-of-the-road" compared to the market in Hong Kong, where the median P/E ratio is around 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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Recent times have been quite advantageous for Lingbao Gold Group as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Lingbao Gold Group

Although there are no analyst estimates available for Lingbao Gold Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Does Growth Match The P/E?

In order to justify its P/E ratio, Lingbao Gold Group would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 238%. The latest three year period has also seen an excellent 215% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 20% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it interesting that Lingbao Gold Group is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Lingbao Gold Group's P/E?

Lingbao Gold Group appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Lingbao Gold Group currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Lingbao Gold Group that you should be aware of.

If these risks are making you reconsider your opinion on Lingbao Gold Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.