Shenzhen Fortune Trend Technology Co., Ltd. (SHSE:688318) stock had a very successful month, rising 26% after a volatile period earlier. Looking at the broader picture, his 12% increase for the year is also quite reasonable, although not as strong as last month.
After such a significant price increase, Shenzhen Fortune Trend Technology’s price-to-earnings ratio (or “P/E”) of 54.3 times makes it seem like a strong sell at the moment compared to the Chinese market, which accounts for about half of the stock’s value. It may look like. Companies have P/E ratios below 32 times, and companies with P/E ratios below 20 times are not uncommon. However, it would be unwise to take the P/E ratio at face value, as there may be an explanation as to why it is so high.
Shenzhen Fortune Trend Technology has grown its revenue faster than most other companies, and has certainly performed well recently. The P/E ratio is high because investors believe this strong performance will continue. If this isn’t the case, existing shareholders might be a little worried about the viability of the share price.
Check out our latest analysis on Shenzhen Fortune Trend Technology.
If you want to know what analysts are predicting for the future, check out this article. free Report on Shenzhen Fortune Trend Technology.
What is the growth trend of Shenzhen Fortune Trend Technology?
The only time it’s really reassuring to see a P/E as steep as Shenzhen Fortune Trend Technology’s is when the company’s growth is clearly on track to outperform the market.
First, looking back at the past, we can see that the company grew its earnings per share by an impressive 84% in the last year. EPS has also increased by a total of 10% compared to his three years ago, mainly thanks to growth in the last 12 months. So we can say that recent earnings growth has been respectable for the company.
Looking ahead, the only analyst that follows the company says that its EPS is expected to increase by 32% over the next year. This figure is expected to be significantly lower than the overall market growth rate forecast of 38%.
With this in mind, it’s concerning that Shenzhen Fortune Trend Technology’s P/E ratio is higher than most other companies. Apparently, many of the company’s investors are much more bullish than analysts are suggesting and are not willing to exit the stock at any price. Only the boldest would think this price is sustainable, as this level of earnings growth will likely end up weighing heavily on the stock price.
The last word
Shenzhen Fortune Trend Technology’s stock price has been gaining quite a bit of momentum lately, which is why its P/E ratio has increased significantly. It has been argued that the price-to-earnings ratio is a poor measure of value in certain industries, but can be a powerful indicator of business confidence.
We find that Shenzhen Fortune Trend Technology’s forecast growth rate is lower than the broader market, so it is currently trading at a much higher P/E than expected. When we see a weak earnings outlook that is below market growth, we think there is a risk that the stock price will fall, reducing the high P/E ratio. This puts shareholders’ investments at significant risk and puts potential investors at risk of paying an excessive premium.
A company’s balance sheet is another important area of risk analysis.take a look at ours free A balance sheet analysis of Shenzhen Fortune Trend Technology, including 6 quick checks on some of these important factors.
the important thing is, Make sure to look for great companies, not just the first idea you come across. So take a look at this free A list of interesting companies with high recent earnings growth (and low P/E ratios).
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis, including below, to see if Shenzhen Fortune Trends Technology is potentially overvalued or undervalued. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
