Even With A 30% Surge, Cautious Investors Are Not Rewarding KoMiCo Ltd.'s (KOSDAQ:183300) Performance Completely

Despite an already strong run, KoMiCo Ltd. (KOSDAQ:183300) shares have been powering on, with a gain of 30% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about KoMiCo's P/E ratio of 10.9x, since the median price-to-earnings (or "P/E") ratio in Korea is also close to 12x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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KoMiCo certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

View our latest analysis for KoMiCo

Keen to find out how analysts think KoMiCo's future stacks up against the industry? In that case, our free report is a great place to start.

How Is KoMiCo's Growth Trending?

The only time you'd be comfortable seeing a P/E like KoMiCo's is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company grew earnings per share by an impressive 74% last year. The latest three year period has also seen a 16% overall rise in EPS, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 37% as estimated by the dual analysts watching the company. With the market only predicted to deliver 24%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that KoMiCo is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

KoMiCo appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

Our examination of KoMiCo's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

And what about other risks? Every company has them, and we've spotted 2 warning signs for KoMiCo (of which 1 is significant!) you should know about.

You might be able to find a better investment than KoMiCo. 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.