Boditech Med Inc. (KOSDAQ:206640) Shares Fly 49% But Investors Aren't Buying For Growth

Boditech Med Inc. (KOSDAQ:206640) shares have had a really impressive month, gaining 49% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 48% in the last year.

Even after such a large jump in price, Boditech Med may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.2x, since almost half of all companies in Korea have P/E ratios greater than 22x and even P/E's higher than 48x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Recent times have been quite advantageous for Boditech Med as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Boditech Med

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Boditech Med will help you shine a light on its historical performance.

How Is Boditech Med's Growth Trending?

In order to justify its P/E ratio, Boditech Med would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 290% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 47% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Boditech Med's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

What We Can Learn From Boditech Med's P/E?

The latest share price surge wasn't enough to lift Boditech Med's P/E close to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Boditech Med maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Boditech Med has 1 warning sign we think you should be aware of.

You might be able to find a better investment than Boditech Med. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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