Those holding Keli Sensing Technology (Ningbo) Co.,Ltd. (SHSE:603662) shares would be relieved that the share price has rebounded 39% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking back a bit further, it's encouraging to see the stock is up 64% in the last year.
Although its price has surged higher, there still wouldn't be many who think Keli Sensing Technology (Ningbo)Ltd's price-to-earnings (or "P/E") ratio of 31.1x is worth a mention when the median P/E in China is similar at about 30x. 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.
Recent times have been pleasing for Keli Sensing Technology (Ningbo)Ltd as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Does Growth Match The P/E?
Keli Sensing Technology (Ningbo)Ltd'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.
If we review the last year of earnings growth, the company posted a worthy increase of 3.7%. EPS has also lifted 6.2% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing earnings over that time.
Turning to the outlook, the next year should generate growth of 51% as estimated by the four analysts watching the company. With the market only predicted to deliver 41%, the company is positioned for a stronger earnings result.
With this information, we find it interesting that Keli Sensing Technology (Ningbo)Ltd is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.
What We Can Learn From Keli Sensing Technology (Ningbo)Ltd's P/E?
Its shares have lifted substantially and now Keli Sensing Technology (Ningbo)Ltd's P/E is also back up to the market median. 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.
We've established that Keli Sensing Technology (Ningbo)Ltd currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
You always need to take note of risks, for example - Keli Sensing Technology (Ningbo)Ltd has 3 warning signs we think 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 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.