Sukgyung AT Co., Ltd. (KOSDAQ:357550) Stocks Shoot Up 30% But Its P/E Still Looks Reasonable

Sukgyung AT Co., Ltd. (KOSDAQ:357550) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 52% in the last year.

Following the firm bounce in price, Sukgyung AT may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 75.6x, since almost half of all companies in Korea have P/E ratios under 13x and even P/E's lower than 7x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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With earnings growth that's superior to most other companies of late, Sukgyung AT has been doing relatively well. 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.

Check out our latest analysis for Sukgyung AT

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

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

In order to justify its P/E ratio, Sukgyung AT would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 27% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 16% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 83% during the coming year according to the only analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 36%, which is noticeably less attractive.

With this information, we can see why Sukgyung AT 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.

The Final Word

Shares in Sukgyung AT have built up some good momentum lately, which has really inflated its P/E. 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 Sukgyung AT'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.

It is also worth noting that we have found 2 warning signs for Sukgyung AT (1 is potentially serious!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.