Market Participants Recognise ISC Co., Ltd.'s (KOSDAQ:095340) Earnings Pushing Shares 31% Higher

ISC Co., Ltd. (KOSDAQ:095340) shares have continued their recent momentum with a 31% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 42% in the last year.

Since its price has surged higher, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 15x, you may consider ISC as a stock to avoid entirely with its 38.1x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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With its earnings growth in positive territory compared to the declining earnings of most other companies, ISC has been doing quite well of late. 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.

View our latest analysis for ISC

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

Is There Enough Growth For ISC?

The only time you'd be truly comfortable seeing a P/E as steep as ISC's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 35% last year. Still, incredibly EPS has fallen 34% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 22% per year during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 18% per year, which is noticeably less attractive.

With this information, we can see why ISC is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On ISC's P/E

The strong share price surge has got ISC's P/E rushing to great heights as well. 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.

As we suspected, our examination of ISC's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for ISC that you should be aware of.

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.