Uni-Bio Science Group Limited (HKG:690) Surges 35% Yet Its Low P/E Is No Reason For Excitement

Uni-Bio Science Group Limited (HKG:690) shares have had a really impressive month, gaining 35% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

Although its price has surged higher, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 9x, you may still consider Uni-Bio Science Group as an attractive investment with its 4.6x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Uni-Bio Science Group certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Uni-Bio Science Group

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Uni-Bio Science Group's earnings, revenue and cash flow.

How Is Uni-Bio Science Group's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Uni-Bio Science Group's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 59% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 22% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Uni-Bio Science Group's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Uni-Bio Science Group's P/E

Uni-Bio Science Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Uni-Bio Science Group maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Uni-Bio Science Group (including 1 which doesn't sit too well with us).

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.