Nanofilm Technologies International Limited's (SGX:MZH) Share Price Matching Investor Opinion

With a price-to-earnings (or "P/E") ratio of 44.1x Nanofilm Technologies International Limited (SGX:MZH) may be sending very bearish signals at the moment, given that almost half of all companies in Singapore have P/E ratios under 15x and even P/E's lower than 9x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Nanofilm Technologies International has been doing quite well of late. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Nanofilm Technologies International

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

How Is Nanofilm Technologies International's Growth Trending?

In order to justify its P/E ratio, Nanofilm Technologies International would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 52% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 100% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 21% per annum during the coming three years according to the four analysts following the company. With the market only predicted to deliver 14% per annum, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Nanofilm Technologies International's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

As we suspected, our examination of Nanofilm Technologies International'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. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Nanofilm Technologies International (1 is a bit unpleasant!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).

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