Earnings Tell The Story For Taihan Cable & Solution Co., Ltd. (KRX:001440) As Its Stock Soars 54%

Despite an already strong run, Taihan Cable & Solution Co., Ltd. (KRX:001440) shares have been powering on, with a gain of 54% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 33% in the last year.

After such a large jump in price, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 13x, you may consider Taihan Cable & Solution as a stock to avoid entirely with its 51.7x 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 lofty.

Taihan Cable & Solution certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Taihan Cable & Solution

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Taihan Cable & Solution will help you shine a light on its historical performance.

Is There Enough Growth For Taihan Cable & Solution?

In order to justify its P/E ratio, Taihan Cable & Solution 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 221%. Pleasingly, EPS has also lifted 889% in aggregate from three years ago, thanks to the last 12 months of growth. 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 30% shows it's noticeably more attractive on an annualised basis.

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

What We Can Learn From Taihan Cable & Solution's P/E?

The strong share price surge has got Taihan Cable & Solution's P/E rushing to great heights as well. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Taihan Cable & Solution maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, 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. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Taihan Cable & Solution (1 shouldn't be ignored!) that you need to be mindful 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.