Telcoware Co.,Ltd. (KRX:078000) Stock Rockets 28% But Many Are Still Ignoring The Company

Telcoware Co.,Ltd. (KRX:078000) shareholders have had their patience rewarded with a 28% share price jump in the last month. Notwithstanding the latest gain, the annual share price return of 8.9% isn't as impressive.

Although its price has surged higher, there still wouldn't be many who think TelcowareLtd's price-to-earnings (or "P/E") ratio of 11.7x is worth a mention when the median P/E in Korea is similar at about 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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We'd have to say that with no tangible growth over the last year, TelcowareLtd's earnings have been unimpressive. One possibility is that the P/E is moderate because investors think this benign earnings growth rate might not be enough to outperform the broader market in the near future. 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.

Check out our latest analysis for TelcowareLtd

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

How Is TelcowareLtd's Growth Trending?

TelcowareLtd's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. Although pleasingly EPS has lifted 199% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 20% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's curious that TelcowareLtd's P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On TelcowareLtd's P/E

Its shares have lifted substantially and now TelcowareLtd's P/E is also back up to the market median. 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.

Our examination of TelcowareLtd revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Before you settle on your opinion, we've discovered 3 warning signs for TelcowareLtd that you should be aware of.

If these risks are making you reconsider your opinion on TelcowareLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.