Earnings Tell The Story For Meta Biomed Co., Ltd. (KOSDAQ:059210) As Its Stock Soars 30%

Meta Biomed Co., Ltd. (KOSDAQ:059210) shares have had a really impressive month, gaining 30% after a shaky period beforehand. The annual gain comes to 126% following the latest surge, making investors sit up and take notice.

After such a large jump in price, Meta Biomed's price-to-earnings (or "P/E") ratio of 16.9x might make it look like a sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 14x and even P/E's below 7x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

The recent earnings growth at Meta Biomed would have to be considered satisfactory if not spectacular. It might be that many expect the reasonable 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 may be a little nervous about the viability of the share price.

Check out our latest analysis for Meta Biomed

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 Meta Biomed's earnings, revenue and cash flow.

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

Meta Biomed's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 3.4% last year. This was backed up an excellent period prior to see EPS up by 265% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 37% over the next year, materially lower than the company's recent medium-term annualised growth rates.

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

The Key Takeaway

Meta Biomed shares have received a push in the right direction, but its P/E is elevated too. 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 Meta Biomed maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Meta Biomed that you need to be mindful of.

If you're unsure about the strength of Meta Biomed's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.