Jiangsu Libert INC. (SHSE:605167) shares have had a horrible month, losing 34% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

Although its price has dipped substantially, Jiangsu Libert's price-to-earnings (or "P/E") ratio of 18.2x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 28x and even P/E's above 50x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Jiangsu Libert 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. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

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

The only time you'd be truly comfortable seeing a P/E as low as Jiangsu Libert's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 32% last year. The latest three year period has also seen an excellent 34% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 55% over the next year. Meanwhile, the rest of the market is forecast to only expand by 41%, which is noticeably less attractive.

With this information, we find it odd that Jiangsu Libert is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Jiangsu Libert's P/E

Jiangsu Libert's recently weak share price has pulled its P/E below 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 Jiangsu Libert currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Before you take the next step, you should know about the 1 warning sign for Jiangsu Libert that we have uncovered.

Of course, you might also be able to find a better stock than Jiangsu Libert. 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.