Market Participants Recognise hyungji Elite Co., Ltd.'s (KRX:093240) Earnings Pushing Shares 52% Higher

hyungji Elite Co., Ltd. (KRX:093240) shareholders have had their patience rewarded with a 52% share price jump in the last month. The last month tops off a massive increase of 155% in the last year.

Following the firm bounce in price, hyungji Elite's price-to-earnings (or "P/E") ratio of 21.1x might make it look like a strong sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 11x and even P/E's below 6x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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hyungji Elite 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.

See our latest analysis for hyungji Elite

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 hyungji Elite's earnings, revenue and cash flow.

How Is hyungji Elite's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as hyungji Elite's 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 87%. The strong recent performance means it was also able to grow EPS by 896% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 21% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why hyungji Elite is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

What We Can Learn From hyungji Elite's P/E?

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

As we suspected, our examination of hyungji Elite revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 5 warning signs for hyungji Elite (3 make us uncomfortable!) that you need to be mindful of.

If these risks are making you reconsider your opinion on hyungji Elite, 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.