KEPCO Engineering & Construction Company, Inc. (KRX:052690) Looks Just Right With A 25% Price Jump

Those holding KEPCO Engineering & Construction Company, Inc. (KRX:052690) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.2% in the last twelve months.

Since its price has surged higher, KEPCO Engineering & Construction Company may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 65.8x, since almost half of all companies in Korea have P/E ratios under 11x and even P/E's lower than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent earnings growth for KEPCO Engineering & Construction Company has been in line with the market. It might be that many expect the mediocre earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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Is There Enough Growth For KEPCO Engineering & Construction Company?

KEPCO Engineering & Construction Company'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.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. Although pleasingly EPS has lifted 288% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 44% as estimated by the five analysts watching the company. With the market only predicted to deliver 33%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that KEPCO Engineering & Construction Company's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From KEPCO Engineering & Construction Company's P/E?

The strong share price surge has got KEPCO Engineering & Construction Company's P/E rushing to great heights as well. 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 KEPCO Engineering & Construction Company 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.

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

If these risks are making you reconsider your opinion on KEPCO Engineering & Construction Company, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.