Korea Cable T.V Chung-Buk System Co., Ltd. (KOSDAQ:066790) Stocks Shoot Up 34% But Its P/E Still Looks Reasonable

Korea Cable T.V Chung-Buk System Co., Ltd. (KOSDAQ:066790) shares have had a really impressive month, gaining 34% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 35% in the last twelve months.

After such a large jump in price, Korea Cable T.V Chung-Buk System may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 52.1x, 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. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Korea Cable T.V Chung-Buk System certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Korea Cable T.V Chung-Buk System

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Korea Cable T.V Chung-Buk System will help you shine a light on its historical performance.

How Is Korea Cable T.V Chung-Buk System's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Korea Cable T.V Chung-Buk System's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 450%. The latest three year period has also seen an excellent 356% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 34% shows it's noticeably more attractive on an annualised basis.

With this information, we can see why Korea Cable T.V Chung-Buk System is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Final Word

Shares in Korea Cable T.V Chung-Buk System have built up some good momentum lately, which has really inflated its P/E. 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 Korea Cable T.V Chung-Buk System maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Korea Cable T.V Chung-Buk System (1 is a bit unpleasant!) that you should be aware of.

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.