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JinkoSolar Holding Co., Ltd. (NYSE:JKS) Stock Catapults 50% Though Its Price And Business Still Lag The Market

Despite an already strong run, JinkoSolar Holding Co., Ltd. (NYSE:JKS) shares have been powering on, with a gain of 50% in the last thirty days. The last 30 days bring the annual gain to a very sharp 86%.

Although its price has surged higher, JinkoSolar Holding may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 7.6x, since almost half of all companies in the United States have P/E ratios greater than 18x and even P/E's higher than 36x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, JinkoSolar Holding has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for JinkoSolar Holding

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

How Is JinkoSolar Holding's Growth Trending?

In order to justify its P/E ratio, JinkoSolar Holding would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 154% last year. The latest three year period has also seen an excellent 104% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should bring diminished returns, with earnings decreasing 24% per year as estimated by the seven analysts watching the company. With the market predicted to deliver 13% growth per annum, that's a disappointing outcome.

In light of this, it's understandable that JinkoSolar Holding's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

Even after such a strong price move, JinkoSolar Holding's P/E still trails the rest of the market significantly. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that JinkoSolar Holding maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with JinkoSolar Holding (including 2 which don't sit too well with us).

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's 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.

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