The Market Lifts JBM (Healthcare) Limited (HKG:2161) Shares 38% But It Can Do More

Despite an already strong run, JBM (Healthcare) Limited (HKG:2161) shares have been powering on, with a gain of 38% in the last thirty days. The last month tops off a massive increase of 207% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think JBM (Healthcare)'s price-to-earnings (or "P/E") ratio of 12x is worth a mention when the median P/E in Hong Kong is similar at about 11x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Recent times have been advantageous for JBM (Healthcare) as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

See our latest analysis for JBM (Healthcare)

Keen to find out how analysts think JBM (Healthcare)'s future stacks up against the industry? In that case, our free report is a great place to start.

How Is JBM (Healthcare)'s Growth Trending?

JBM (Healthcare)'s P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered an exceptional 63% gain to the company's bottom line. Pleasingly, EPS has also lifted 780% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 17% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 14% per annum, which is noticeably less attractive.

In light of this, it's curious that JBM (Healthcare)'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 JBM (Healthcare)'s P/E

Its shares have lifted substantially and now JBM (Healthcare)'s P/E is also back up to the market median. 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 JBM (Healthcare) currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. 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.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for JBM (Healthcare) with six simple checks will allow you to discover any risks that could be an issue.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.