After Leaping 33% Q Technology (Group) Company Limited (HKG:1478) Shares Are Not Flying Under The Radar

Q Technology (Group) Company Limited (HKG:1478) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. The last month tops off a massive increase of 114% in the last year.

After such a large jump in price, Q Technology (Group) may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 35.4x, since almost half of all companies in Hong Kong have P/E ratios under 11x and even P/E's lower than 6x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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Recent times have been advantageous for Q Technology (Group) as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Q Technology (Group)

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Q Technology (Group).

How Is Q Technology (Group)'s Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Q Technology (Group)'s to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 241%. Still, incredibly EPS has fallen 70% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 36% per year over the next three years. With the market only predicted to deliver 14% per year, the company is positioned for a stronger earnings result.

With this information, we can see why Q Technology (Group) is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Q Technology (Group)'s P/E?

Shares in Q Technology (Group) have built up some good momentum lately, which has really inflated its P/E. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Q Technology (Group)'s analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Q Technology (Group) 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.