Despite an already strong run, Shanghai Yahong Moulding Co., Ltd. (SHSE:603159) shares have been powering on, with a gain of 31% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.
Since its price has surged higher, given close to half the companies in China have price-to-earnings ratios (or “P/E’s”) below 36x, you may consider Shanghai Yahong Moulding as a stock to avoid entirely with its 66.2x P/E ratio. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
For instance, Shanghai Yahong Moulding’s receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. If not, then existing shareholders…
