Investors Appear Satisfied With SUNIC SYSTEM Co., Ltd.'s (KOSDAQ:171090) Prospects As Shares Rocket 26%

SUNIC SYSTEM Co., Ltd. (KOSDAQ:171090) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 75%.

Following the firm bounce in price, SUNIC SYSTEM's price-to-earnings (or "P/E") ratio of 60.2x might make it look like a strong sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 11x and even P/E's below 6x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, SUNIC SYSTEM has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for SUNIC SYSTEM

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How Is SUNIC SYSTEM's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like SUNIC SYSTEM's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 64%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 159% during the coming year according to the only analyst following the company. With the market only predicted to deliver 33%, the company is positioned for a stronger earnings result.

With this information, we can see why SUNIC SYSTEM 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 Final Word

Shares in SUNIC SYSTEM have built up some good momentum lately, which has really inflated its P/E. 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.

As we suspected, our examination of SUNIC SYSTEM'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.

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

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.