Hyosung Heavy Industries Corporation's (KRX:298040) P/E Is Still On The Mark Following 36% Share Price Bounce

Hyosung Heavy Industries Corporation (KRX:298040) shares have had a really impressive month, gaining 36% after a shaky period beforehand. The annual gain comes to 195% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 14x, you may consider Hyosung Heavy Industries as a stock to avoid entirely with its 23.5x 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.

Recent times have been pleasing for Hyosung Heavy Industries as its earnings have risen in spite of the market's earnings going into reverse. It seems that many are expecting the company to continue defying the broader market adversity, 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.

View our latest analysis for Hyosung Heavy Industries

Want the full picture on analyst estimates for the company? Then our free report on Hyosung Heavy Industries will help you uncover what's on the horizon.

How Is Hyosung Heavy Industries' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Hyosung Heavy Industries' is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 165%. The latest three year period has also seen an excellent 566% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 153% over the next year. With the market only predicted to deliver 36%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Hyosung Heavy Industries' 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 Bottom Line On Hyosung Heavy Industries' P/E

The strong share price surge has got Hyosung Heavy Industries' P/E rushing to great heights as well. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Hyosung Heavy Industries' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Hyosung Heavy Industries (1 is a bit unpleasant!) that you should be aware of before investing here.

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.