Investors Appear Satisfied With Sung Kwang Bend Co.,Ltd.'s (KOSDAQ:014620) Prospects As Shares Rocket 26%

Sung Kwang Bend Co.,Ltd. (KOSDAQ:014620) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 162% in the last year.

Since its price has surged higher, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 11x, you may consider Sung Kwang BendLtd as a stock to avoid entirely with its 20x 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.

With earnings growth that's superior to most other companies of late, Sung Kwang BendLtd has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Sung Kwang BendLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sung Kwang BendLtd.

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

In order to justify its P/E ratio, Sung Kwang BendLtd would need to produce outstanding growth well in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 20%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 47% during the coming year according to the five analysts following the company. That's shaping up to be materially higher than the 34% growth forecast for the broader market.

With this information, we can see why Sung Kwang BendLtd 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.

The Bottom Line On Sung Kwang BendLtd's P/E

Sung Kwang BendLtd's P/E is flying high just like its stock has during the last month. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Sung Kwang BendLtd 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. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Sung Kwang BendLtd with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Sung Kwang BendLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.