Mirae Asset Securities Co., Ltd.'s (KRX:006800) Shares Climb 54% But Its Business Is Yet to Catch Up

Mirae Asset Securities Co., Ltd. (KRX:006800) shares have continued their recent momentum with a 54% gain in the last month alone. The last month tops off a massive increase of 172% in the last year.

Although its price has surged higher, there still wouldn't be many who think Mirae Asset Securities' price-to-earnings (or "P/E") ratio of 14.1x is worth a mention when the median P/E in Korea is similar at about 13x. 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, Mirae Asset Securities has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Mirae Asset Securities

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

Is There Some Growth For Mirae Asset Securities?

There's an inherent assumption that a company should be matching the market for P/E ratios like Mirae Asset Securities' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 229% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 19% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 8.3% per year as estimated by the twelve analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 13% each year, which is noticeably more attractive.

In light of this, it's curious that Mirae Asset Securities' P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On Mirae Asset Securities' P/E

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

Our examination of Mirae Asset Securities' analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. 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.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Mirae Asset Securities (of which 2 don't sit too well with us!) you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.