Market Might Still Lack Some Conviction On Kingfa Science & Technology (India) Limited (NSE:KINGFA) Even After 43% Share Price Boost

Kingfa Science & Technology (India) Limited (NSE:KINGFA) shares have continued their recent momentum with a 43% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 51% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Kingfa Science & Technology (India)'s price-to-earnings (or "P/E") ratio of 34x right now seems quite "middle-of-the-road" compared to the market in India, where the median P/E ratio is around 33x. 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.

Kingfa Science & Technology (India) has been doing a good job lately as it's been growing earnings at a solid pace. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

View our latest analysis for Kingfa Science & Technology (India)

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Kingfa Science & Technology (India) will help you shine a light on its historical performance.

How Is Kingfa Science & Technology (India)'s Growth Trending?

The only time you'd be comfortable seeing a P/E like Kingfa Science & Technology (India)'s is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 11% last year. Pleasingly, EPS has also lifted 592% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 25% 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 Kingfa Science & Technology (India) 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.

The Key Takeaway

Kingfa Science & Technology (India) appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Kingfa Science & Technology (India) currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings 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 the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Kingfa Science & Technology (India).

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.