SUPCON Technology Co., Ltd. (SHSE:688777) may not be as cheap as it seems

Nearly half of Chinese companies trade at a price-to-earnings ratio (or “P/E”) of 29 or more. SUPCON Technology Co., Ltd. (SHSE:688777) is an attractive investment with a P/E ratio of 25.7x, however it would be unwise to take the P/E at face value as this could explain why the P/E is limited.

SUPCON Technology has certainly been doing well recently, with earnings growing faster than most other companies. Many are expecting this strong earnings performance to deteriorate significantly, which may be keeping the P/E in check. If not, existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for SUPCON Technology

Want to know what analysts think about the future of SUPCON Technology compared to the industry? free The report is a great place to start.

Does SUPCON technology have growth potential?

SUPCON Technology’s P/E ratio is typical for a company that is expected to have limited growth and, importantly, underperform the market.

Looking at revenue growth over the last year, the company recorded an impressive 26% increase. Over the last three years, EPS has grown by an impressive 96% overall, buoyed by short-term performance, so shareholders have likely welcomed these medium-term revenue growth rates.

Turning to the outlook, analysts monitoring the company are predicting it will grow at 25% annually for the next three years, which is likely to be similar to the overall market growth forecast of 25% per year.

Considering this, it’s odd that SUPCON Technology’s P/E is lower than most other companies – apparently some shareholders are skeptical of the forecasts and are willing to accept a lower selling price.

SUPCON Technology P/E Conclusion

While the price-to-earnings ratio is not a deciding factor in whether or not to buy a stock, it is a very useful barometer for gauging earnings expectations.

Since SUPCON Technology’s expected growth rate is in line with the overall market, we find the company’s P/E ratio trading at a lower than expected level. Some unobserved threats to earnings could cause the P/E ratio to be out of line with expectations. Typically, such a situation would provide further support for the stock, so some may be expecting earnings volatility.

There are other important risk factors to consider, too, and we found Two Warning Signs for SUPCON Technology (Number 1 can’t be ignored!) Here’s what you need to know before investing.

These are Risks will make you reconsider your opinion on SUPCON technologyTo see what other stocks are out there, check out our interactive list of high quality stocks.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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