Earnings Not Telling The Story For PSK HOLDINGS Inc. (KOSDAQ:031980) After Shares Rise 33%

Despite an already strong run, PSK HOLDINGS Inc. (KOSDAQ:031980) shares have been powering on, with a gain of 33% in the last thirty days. The last 30 days were the cherry on top of the stock's 326% gain in the last year, which is nothing short of spectacular.

Since its price has surged higher, PSK HOLDINGS' price-to-earnings (or "P/E") ratio of 21.2x might make it look like a sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 14x and even P/E's below 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

Recent times have been pleasing for PSK HOLDINGS as its earnings have risen in spite of the market's earnings going into reverse. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for PSK HOLDINGS

If you'd like to see what analysts are forecasting going forward, you should check out our free report on PSK HOLDINGS.

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

PSK HOLDINGS' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings growth, the company posted a worthy increase of 14%. However, this wasn't enough as the latest three year period has seen an unpleasant 40% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 99% as estimated by the two analysts watching the company. That's not great when the rest of the market is expected to grow by 37%.

With this information, we find it concerning that PSK HOLDINGS is trading at a P/E higher than the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining earnings are likely to weigh heavily on the share price eventually.

The Key Takeaway

PSK HOLDINGS' P/E is getting right up there since its shares have risen strongly. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of PSK HOLDINGS' analyst forecasts revealed that its outlook for shrinking earnings isn't impacting its high P/E anywhere near as much as we would have predicted. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings are highly unlikely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Plus, you should also learn about these 4 warning signs we've spotted with PSK HOLDINGS.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.