Shenyang Jinbei Automotive Company Limited (SHSE:600609) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, despite the strong performance over the last month, the full year gain of 8.8% isn't as attractive.

Even after such a large jump in price, it's still not a stretch to say that Shenyang Jinbei Automotive's price-to-earnings (or "P/E") ratio of 28.1x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 31x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been quite advantageous for Shenyang Jinbei Automotive as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

What Are Growth Metrics Telling Us About The P/E?

The only time you'd be comfortable seeing a P/E like Shenyang Jinbei Automotive's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 121%. The strong recent performance means it was also able to grow EPS by 198% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

It's interesting to note that the rest of the market is similarly expected to grow by 40% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why Shenyang Jinbei Automotive is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What We Can Learn From Shenyang Jinbei Automotive's P/E?

Shenyang Jinbei Automotive's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Shenyang Jinbei Automotive maintains its moderate P/E off the back of its recent three-year growth being in line with the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Shenyang Jinbei Automotive with six simple checks will allow you to discover any risks that could be an issue.

Of course, you might also be able to find a better stock than Shenyang Jinbei Automotive. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.