HB Technology CO.,LTD. (KOSDAQ:078150) Shares Fly 26% But Investors Aren't Buying For Growth

HB Technology CO.,LTD. (KOSDAQ:078150) shares have continued their recent momentum with a 26% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 39%.

Even after such a large jump in price, HB TechnologyLTD's price-to-earnings (or "P/E") ratio of 3.8x might still make it look like a strong buy right now compared to the market in Korea, where around half of the companies have P/E ratios above 14x and even P/E's above 27x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, HB TechnologyLTD has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. 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 out of favour.

Check out our latest analysis for HB TechnologyLTD

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

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

In order to justify its P/E ratio, HB TechnologyLTD would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered an exceptional 175% gain to the company's bottom line. Pleasingly, EPS has also lifted 1,802% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 8.7% as estimated by the only analyst watching the company. Meanwhile, the rest of the market is forecast to expand by 29%, which is noticeably more attractive.

With this information, we can see why HB TechnologyLTD is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Shares in HB TechnologyLTD are going to need a lot more upward momentum to get the company's P/E out of its slump. 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.

We've established that HB TechnologyLTD maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for HB TechnologyLTD (1 shouldn't be ignored!) that we have uncovered.

You might be able to find a better investment than HB TechnologyLTD. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.