SNT Energy Co., Ltd.'s (KRX:100840) 26% Jump Shows Its Popularity With Investors

SNT Energy Co., Ltd. (KRX:100840) shares have continued their recent momentum with a 26% gain in the last month alone. This latest share price bounce rounds out a remarkable 414% gain over the last twelve months.

Following the firm bounce in price, SNT Energy may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 33.9x, since almost half of all companies in Korea have P/E ratios under 14x and even P/E's lower than 8x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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SNT Energy certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for SNT Energy

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

Does Growth Match The High P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 60% last year. The strong recent performance means it was also able to grow EPS by 601% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 36% per year as estimated by the five analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 17% per year, which is noticeably less attractive.

In light of this, it's understandable that SNT Energy's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Shares in SNT Energy have built up some good momentum lately, which has really inflated its P/E. 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.

As we suspected, our examination of SNT Energy's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for SNT Energy you should know about.

Of course, you might also be able to find a better stock than SNT Energy. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.