Ibkimyoung Co., Ltd. (KOSDAQ:339950) Stock Rockets 44% As Investors Are Less Pessimistic Than Expected

Ibkimyoung Co., Ltd. (KOSDAQ:339950) shareholders have had their patience rewarded with a 44% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 60%.

Although its price has surged higher, there still wouldn't be many who think Ibkimyoung's price-to-earnings (or "P/E") ratio of 10.5x is worth a mention when the median P/E in Korea is similar at about 11x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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With earnings growth that's superior to most other companies of late, Ibkimyoung has been doing relatively well. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Ibkimyoung

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What Are Growth Metrics Telling Us About The P/E?

In order to justify its P/E ratio, Ibkimyoung would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 63%. The strong recent performance means it was also able to grow EPS by 141% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 5.0% as estimated by the one analyst watching the company. With the market predicted to deliver 22% growth , the company is positioned for a weaker earnings result.

With this information, we find it interesting that Ibkimyoung is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Key Takeaway

Its shares have lifted substantially and now Ibkimyoung's P/E is also back up to the market median. 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.

We've established that Ibkimyoung currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

It is also worth noting that we have found 2 warning signs for Ibkimyoung that you need to take into consideration.

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