HL Mando Corporation (KRX:204320) Stocks Shoot Up 25% But Its P/E Still Looks Reasonable

Despite an already strong run, HL Mando Corporation (KRX:204320) shares have been powering on, with a gain of 25% in the last thirty days. Looking further back, the 21% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, given around half the companies in Korea have price-to-earnings ratios (or "P/E's") below 13x, you may consider HL Mando as a stock to potentially avoid with its 18.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

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HL Mando hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

View our latest analysis for HL Mando

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

How Is HL Mando's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as HL Mando's is when the company's growth is on track to outshine the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 3.6%. The last three years don't look nice either as the company has shrunk EPS by 44% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 84% as estimated by the analysts watching the company. With the market only predicted to deliver 34%, the company is positioned for a stronger earnings result.

With this information, we can see why HL Mando is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From HL Mando's P/E?

The large bounce in HL Mando's shares has lifted the company's P/E to a fairly high level. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that HL Mando maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for HL Mando that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.