ZTO Express (Cayman) Inc. (NYSE:ZTO) Looks Just Right With A 26% Price Jump

ZTO Express (Cayman) Inc. (NYSE:ZTO) shareholders have had their patience rewarded with a 26% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 13% is also fairly reasonable.

Although its price has surged higher, you could still be forgiven for feeling indifferent about ZTO Express (Cayman)'s P/E ratio of 17.8x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 18x. 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.

ZTO Express (Cayman) certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for ZTO Express (Cayman)

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

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

The only time you'd be comfortable seeing a P/E like ZTO Express (Cayman)'s is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered a decent 3.6% gain to the company's bottom line. The latest three year period has also seen an excellent 102% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 12% each year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 10% per annum growth forecast for the broader market.

In light of this, it's understandable that ZTO Express (Cayman)'s P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

ZTO Express (Cayman) appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that ZTO Express (Cayman) maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. 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 - ZTO Express (Cayman) has 1 warning sign we think you should be aware of.

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 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.