With Chung-Hsin Electric and Machinery Manufacturing Corp. (TWSE:1513) It Looks Like You'll Get What You Pay For

There wouldn't be many who think Chung-Hsin Electric and Machinery Manufacturing Corp.'s (TWSE:1513) price-to-earnings (or "P/E") ratio of 23.4x is worth a mention when the median P/E in Taiwan is similar at about 22x. 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.

With earnings growth that's superior to most other companies of late, Chung-Hsin Electric and Machinery Manufacturing has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Chung-Hsin Electric and Machinery Manufacturing

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Chung-Hsin Electric and Machinery Manufacturing.

Is There Some Growth For Chung-Hsin Electric and Machinery Manufacturing?

Chung-Hsin Electric and Machinery Manufacturing's 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 139% gain to the company's bottom line. Pleasingly, EPS has also lifted 48% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 16% each year over the next three years. That's shaping up to be similar to the 16% each year growth forecast for the broader market.

With this information, we can see why Chung-Hsin Electric and Machinery Manufacturing is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Chung-Hsin Electric and Machinery Manufacturing's P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Chung-Hsin Electric and Machinery Manufacturing's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You always need to take note of risks, for example - Chung-Hsin Electric and Machinery Manufacturing has 1 warning sign we think you should be aware of.

Of course, you might also be able to find a better stock than Chung-Hsin Electric and Machinery Manufacturing. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.