The Market Lifts Sigong Tech Co., Ltd. (KOSDAQ:020710) Shares 54% But It Can Do More

Sigong Tech Co., Ltd. (KOSDAQ:020710) shareholders have had their patience rewarded with a 54% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 39% in the last year.

Although its price has surged higher, given about half the companies in Korea have price-to-earnings ratios (or "P/E's") above 11x, you may still consider Sigong Tech as a highly attractive investment with its 3.7x P/E ratio. 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.

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Recent times have been quite advantageous for Sigong Tech as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Sigong Tech

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Sigong Tech's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as depressed as Sigong Tech's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 268% gain to the company's bottom line. The latest three year period has also seen an excellent 1,010% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 22% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Sigong Tech's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Sigong Tech's P/E

Even after such a strong price move, Sigong Tech's P/E still trails the rest of the market significantly. 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.

Our examination of Sigong Tech revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

It is also worth noting that we have found 3 warning signs for Sigong Tech that you need to take into consideration.

You might be able to find a better investment than Sigong Tech. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.