Shanghai Sinotec Co., Ltd. (SHSE:603121) shares have continued their recent momentum with a 34% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 27%.
Since its price has surged higher, given around half the companies in China have price-to-earnings ratios (or “P/E’s”) below 36x, you may consider Shanghai Sinotec as a stock to potentially avoid with its 44.7x P/E ratio. Although, it’s not wise to just take the P/E at face value as there may be an explanation why it’s as high as it is.
Recent times have been quite advantageous for Shanghai Sinotec as its earnings have been rising very briskly. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You’d really hope so, otherwise you’re paying a pretty hefty price for no particular reason.
