VT Co., Ltd.'s (KOSDAQ:018290) P/E Is Still On The Mark Following 44% Share Price Bounce

VT Co., Ltd. (KOSDAQ:018290) shareholders have had their patience rewarded with a 44% share price jump in the last month. The last month tops off a massive increase of 250% in the last year.

After such a large jump in price, VT's price-to-earnings (or "P/E") ratio of 29.2x might make it look like a strong sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 13x and even P/E's below 6x 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 lofty.

Recent times have been advantageous for VT as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for VT

Keen to find out how analysts think VT's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For VT?

The only time you'd be truly comfortable seeing a P/E as steep as VT's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 134% gain to the company's bottom line. The latest three year period has also seen an excellent 2,111% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 52% during the coming year according to the sole analyst following the company. With the market only predicted to deliver 28%, the company is positioned for a stronger earnings result.

With this information, we can see why VT is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From VT's P/E?

VT's P/E is flying high just like its stock has during the last month. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that VT maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. 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 2 warning signs for VT that you need to be mindful of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.