Further Upside For JTC Inc. (KOSDAQ:950170) Shares Could Introduce Price Risks After 30% Bounce

JTC Inc. (KOSDAQ:950170) shareholders have had their patience rewarded with a 30% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 29% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about JTC's P/E ratio of 10x, since the median price-to-earnings (or "P/E") ratio in Korea is also close to 12x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

JTC certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

Check out our latest analysis for JTC

Want the full picture on analyst estimates for the company? Then our free report on JTC will help you uncover what's on the horizon.

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

There's an inherent assumption that a company should be matching the market for P/E ratios like JTC's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 204% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 154% during the coming year according to the two analysts following the company. With the market only predicted to deliver 33%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that JTC is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Its shares have lifted substantially and now JTC's P/E is also back up to the market median. 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.

Our examination of JTC's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for JTC with six simple checks.

Of course, you might also be able to find a better stock than JTC. 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.