After Leaping 26% MINISO Group Holding Limited (NYSE:MNSO) Shares Are Not Flying Under The Radar

MINISO Group Holding Limited (NYSE:MNSO) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 110% in the last year.

Following the firm bounce in price, MINISO Group Holding may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 39.5x, since almost half of all companies in the United States have P/E ratios under 15x and even P/E's lower than 8x 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.

MINISO Group Holding certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for MINISO Group Holding

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MINISO Group Holding.

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

The only time you'd be truly comfortable seeing a P/E as steep as MINISO Group Holding's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 83%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should generate growth of 25% each year as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 9.9% per year growth forecast for the broader market.

With this information, we can see why MINISO Group Holding 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.

The Bottom Line On MINISO Group Holding's P/E

Shares in MINISO Group Holding have built up some good momentum lately, which has really inflated its P/E. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of MINISO Group Holding's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for MINISO Group Holding that you should be aware of.

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 P/E below 20x.

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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.