Investors Still Aren't Entirely Convinced By Karrie International Holdings Limited's (HKG:1050) Earnings Despite 26% Price Jump

Despite an already strong run, Karrie International Holdings Limited (HKG:1050) shares have been powering on, with a gain of 26% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 69% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Karrie International Holdings' price-to-earnings (or "P/E") ratio of 11.7x is worth a mention when the median P/E in Hong Kong is similar at about 12x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Recent times have been advantageous for Karrie International Holdings as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Karrie International Holdings

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

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

Karrie International Holdings' 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 20% gain to the company's bottom line. Still, incredibly EPS has fallen 20% 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.

Looking ahead now, EPS is anticipated to climb by 29% during the coming year according to the one analyst following the company. With the market only predicted to deliver 20%, the company is positioned for a stronger earnings result.

In light of this, it's curious that Karrie International Holdings' P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Its shares have lifted substantially and now Karrie International Holdings' 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.

Our examination of Karrie International Holdings' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. 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. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Karrie International Holdings you should be aware of, and 1 of them can't be ignored.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.