The Grand Venture Technology Limited (SGX:JLB) share price has fared very poorly over the last month, falling by a substantial 25%. Longer-term, the stock has been solid despite a difficult 30 days, gaining 15% in the last year.

Even after such a large drop in price, given close to half the companies in Singapore have price-to-earnings ratios (or "P/E's") below 11x, you may still consider Grand Venture Technology as a stock to avoid entirely with its 18.8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

With earnings growth that's superior to most other companies of late, Grand Venture Technology has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Grand Venture Technology

Want the full picture on analyst estimates for the company? Then our free report on Grand Venture Technology will help you uncover what's on the horizon.

How Is Grand Venture Technology's Growth Trending?

Grand Venture Technology's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 96%. However, this wasn't enough as the latest three year period has seen a very unpleasant 45% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 33% during the coming year according to the sole analyst following the company. With the market only predicted to deliver 14%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Grand Venture Technology's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Grand Venture Technology's P/E?

Grand Venture Technology's shares may have retreated, but its P/E is still flying high. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Grand Venture Technology maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Grand Venture Technology with six simple checks.

If these risks are making you reconsider your opinion on Grand Venture Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.