Shanghai XFH Technology Co., Ltd (SZSE:300890) shareholders have had their patience rewarded with a 32% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 10% over that time.
After such a large jump in price, Shanghai XFH Technology’s price-to-earnings (or “P/E”) ratio of 72.8x might make it look like a strong sell right now compared to the market in China, where around half of the companies have P/E ratios below 33x and even P/E’s below 19x are quite common. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
For example, consider that Shanghai XFH Technology’s financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is high because investors think the company will still do enough to outperform the…
