CSC Financial Co., Ltd. (HKG:6066) shares have continued their recent momentum with a 29% gain in the last month alone. The annual gain comes to 121% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, it's still not a stretch to say that CSC Financial's price-to-earnings (or "P/E") ratio of 12.6x right now seems quite "middle-of-the-road" compared to the market in Hong Kong, where the median P/E ratio is around 12x. 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.

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With earnings growth that's superior to most other companies of late, CSC Financial has been doing relatively well. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for CSC Financial

Keen to find out how analysts think CSC Financial's future stacks up against the industry? In that case, our free report is a great place to start.

How Is CSC Financial's Growth Trending?

In order to justify its P/E ratio, CSC Financial would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 52% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 28% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 21% per annum as estimated by the three analysts watching the company. With the market only predicted to deliver 15% each year, the company is positioned for a stronger earnings result.

In light of this, it's curious that CSC Financial's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From CSC Financial's P/E?

CSC Financial'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.

Our examination of CSC Financial's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with CSC Financial.

You might be able to find a better investment than CSC Financial. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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