Espressif Systems (Shanghai) Co., Ltd. (SHSE:688018) shares have continued their recent momentum with a 36% gain in the last month alone. The annual gain comes to 137% 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 China have price-to-earnings ratios (or “P/E’s”) below 37x, you may consider Espressif Systems (Shanghai) as a stock to avoid entirely with its 65.2x 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.
With its earnings growth in positive territory compared to the declining earnings of most other companies, Espressif Systems (Shanghai) has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You’d really hope so, otherwise you’re…
