- Oops!Something went wrong.Please try again later.
Viomi Technology Co., Ltd (NASDAQ:VIOT) shareholders have had their patience rewarded with a 28% share price jump in the last month. But not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 15% in the last twelve months.
In spite of the firm bounce in price, there still wouldn't be many who think Viomi Technology's price-to-earnings (or "P/E") ratio of 21.2x is worth a mention when the median P/E in the United States is similar at about 21x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
Recent times haven't been advantageous for Viomi Technology as its earnings have been falling quicker than most other companies. One possibility is that the P/E is moderate because investors think the company's earnings trend will eventually fall in line with most others in the market. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Viomi Technology will help you uncover what's on the horizon.
How Is Viomi Technology's Growth Trending?
In order to justify its P/E ratio, Viomi Technology would need to produce growth that's similar to the market.
Retrospectively, the last year delivered a frustrating 41% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 88% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.
Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 62% over the next year. With the market only predicted to deliver 15%, the company is positioned for a stronger earnings result.
With this information, we find it interesting that Viomi Technology is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Bottom Line On Viomi Technology's P/E
Viomi Technology's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
We've established that Viomi Technology currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
You should always think about risks. Case in point, we've spotted 2 warning signs for Viomi Technology you should be aware of.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a P/E below 20x.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.