Despite an already strong run, Shanghai Chicmax Cosmetic Co., Ltd. (HKG:2145) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 106% following the latest surge, making investors sit up and take notice.
After such a large jump in price, given close to half the companies in Hong Kong have price-to-earnings ratios (or “P/E’s”) below 11x, you may consider Shanghai Chicmax Cosmetic as a stock to avoid entirely with its 37.9x 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.
Shanghai Chicmax Cosmetic certainly has been doing a good job lately as it’s been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance…
