FNS TECH. Co., Ltd (KOSDAQ:083500) Shares Fly 26% But Investors Aren't Buying For Growth

FNS TECH. Co., Ltd (KOSDAQ:083500) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 97% in the last year.

Although its price has surged higher, FNS TECH may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9.7x, since almost half of all companies in Korea have P/E ratios greater than 14x and even P/E's higher than 29x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Recent times have been advantageous for FNS TECH as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for FNS TECH

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

How Is FNS TECH's Growth Trending?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 35% last year. Pleasingly, EPS has also lifted 82% 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.

Looking ahead now, EPS is anticipated to climb by 7.4% during the coming year according to the one analyst following the company. With the market predicted to deliver 36% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that FNS TECH's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Despite FNS TECH's shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that FNS TECH maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 3 warning signs for FNS TECH you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.