S&S Tech Corporation (KOSDAQ:101490) Stocks Shoot Up 36% But Its P/E Still Looks Reasonable

S&S Tech Corporation (KOSDAQ:101490) shares have continued their recent momentum with a 36% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 27%.

After such a large jump in price, S&S Tech may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 27.7x, since almost half of all companies in Korea have P/E ratios under 13x and even P/E's lower than 7x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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Recent times have been quite advantageous for S&S Tech as its earnings have been rising very briskly. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for S&S Tech

Although there are no analyst estimates available for S&S Tech, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

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

S&S Tech's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 36% last year. The strong recent performance means it was also able to grow EPS by 196% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 29% shows it's noticeably more attractive on an annualised basis.

With this information, we can see why S&S Tech is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Final Word

The strong share price surge has got S&S Tech's P/E rushing to great heights as well. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of S&S Tech revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for S&S Tech with six simple checks on some of these key factors.

If you're unsure about the strength of S&S Tech's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.