Those holding Zhejiang Daily Digital Culture Group Co.,Ltd (SHSE:600633) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Notwithstanding the latest gain, the annual share price return of 8.3% isn't as impressive.

Even after such a large jump in price, Zhejiang Daily Digital Culture GroupLtd may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 17.1x, since almost half of all companies in China have P/E ratios greater than 30x and even P/E's higher than 55x 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 limited.

Recent times have been pleasing for Zhejiang Daily Digital Culture GroupLtd as its earnings have risen in spite of the market's earnings going into reverse. 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.

Keen to find out how analysts think Zhejiang Daily Digital Culture GroupLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The Low P/E?

There's an inherent assumption that a company should underperform the market for P/E ratios like Zhejiang Daily Digital Culture GroupLtd's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 108%. The latest three year period has also seen an excellent 58% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 2.9% as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 41% growth forecast for the broader market.

In light of this, it's understandable that Zhejiang Daily Digital Culture GroupLtd's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Zhejiang Daily Digital Culture GroupLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Zhejiang Daily Digital Culture GroupLtd's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Zhejiang Daily Digital Culture GroupLtd.

Of course, you might also be able to find a better stock than Zhejiang Daily Digital Culture GroupLtd. 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.