Pum-Tech Korea Co., Ltd's (KOSDAQ:251970) Share Price Is Still Matching Investor Opinion Despite 25% Slump

The Pum-Tech Korea Co., Ltd (KOSDAQ:251970) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. Still, a bad month hasn't completely ruined the past year with the stock gaining 28%, which is great even in a bull market.

In spite of the heavy fall in price, Pum-Tech Korea may still be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 17.2x, since almost half of all companies in Korea have P/E ratios under 11x and even P/E's lower than 6x 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 as high as it is.

Pum-Tech Korea certainly has been doing a good job lately as it's been growing earnings more 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.

View our latest analysis for Pum-Tech Korea

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pum-Tech Korea.

How Is Pum-Tech Korea's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like Pum-Tech Korea's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 17% last year. Pleasingly, EPS has also lifted 38% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 23% each year as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 18% each year growth forecast for the broader market.

In light of this, it's understandable that Pum-Tech Korea's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

There's still some solid strength behind Pum-Tech Korea's P/E, if not its share price lately. 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.

As we suspected, our examination of Pum-Tech Korea's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Pum-Tech Korea that you should be aware of.

Of course, you might also be able to find a better stock than Pum-Tech Korea. 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.