Further Upside For MIRAE ASSET Life Insurance Co., Ltd. (KRX:085620) Shares Could Introduce Price Risks After 27% Bounce

MIRAE ASSET Life Insurance Co., Ltd. (KRX:085620) shares have continued their recent momentum with a 27% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

In spite of the firm bounce in price, MIRAE ASSET Life Insurance may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 5.8x, since almost half of all companies in Korea have P/E ratios greater than 13x and even P/E's higher than 26x 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 so limited.

We've discovered 1 warning sign about MIRAE ASSET Life Insurance. View them for free.

With earnings growth that's exceedingly strong of late, MIRAE ASSET Life Insurance has been doing very well. 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for MIRAE ASSET Life Insurance

Although there are no analyst estimates available for MIRAE ASSET Life Insurance, 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?

The only time you'd be truly comfortable seeing a P/E as depressed as MIRAE ASSET Life Insurance's is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 34%. The latest three year period has also seen an excellent 73% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

It's interesting to note that the rest of the market is similarly expected to grow by 19% 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 MIRAE ASSET Life Insurance is trading at a P/E lower than the market. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

What We Can Learn From MIRAE ASSET Life Insurance's P/E?

Even after such a strong price move, MIRAE ASSET Life Insurance's P/E still trails the rest of the market significantly. 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 MIRAE ASSET Life Insurance currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching the company's performance. 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.

You always need to take note of risks, for example - MIRAE ASSET Life Insurance has 1 warning sign we think you should be aware of.

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

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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.