INFINITT Healthcare Co., Ltd. (KOSDAQ:071200) Stock Rockets 31% But Many Are Still Ignoring The Company

INFINITT Healthcare Co., Ltd. (KOSDAQ:071200) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, INFINITT Healthcare's price-to-earnings (or "P/E") ratio of 4.6x might still make it look like a strong buy right now compared to the market in Korea, where around half of the companies have P/E ratios above 13x and even P/E's above 26x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been quite advantageous for INFINITT Healthcare as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for INFINITT Healthcare

Although there are no analyst estimates available for INFINITT Healthcare, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

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

In order to justify its P/E ratio, INFINITT Healthcare would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 153% last year. Pleasingly, EPS has also lifted 109% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

It's interesting to note that the rest of the market is similarly expected to grow by 27% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it odd that INFINITT Healthcare is trading at a P/E lower than the market. It may be that most investors are not convinced the company can maintain recent growth rates.

What We Can Learn From INFINITT Healthcare's P/E?

Shares in INFINITT Healthcare are going to need a lot more upward momentum to get the company's P/E out of its slump. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of INFINITT Healthcare revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Before you take the next step, you should know about the 3 warning signs for INFINITT Healthcare (1 is a bit unpleasant!) that we have uncovered.

Of course, you might also be able to find a better stock than INFINITT Healthcare. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.