After Leaping 39% UJU Electronics Co. Ltd (KOSDAQ:065680) Shares Are Not Flying Under The Radar

UJU Electronics Co. Ltd (KOSDAQ:065680) shares have continued their recent momentum with a 39% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 47% in the last year.

Since its price has surged higher, UJU Electronics may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.8x, since almost half of all companies in Korea have P/E ratios under 11x and even P/E's lower than 6x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

UJU Electronics certainly has been doing a good job lately as it's been growing earnings more than most other companies. 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.

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Is There Enough Growth For UJU Electronics?

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

If we review the last year of earnings growth, the company posted a terrific increase of 95%. However, this wasn't enough as the latest three year period has seen a very unpleasant 35% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 98% as estimated by the one analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 29%, which is noticeably less attractive.

In light of this, it's understandable that UJU Electronics' P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

UJU Electronics' P/E is getting right up there since its shares have risen strongly. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of UJU Electronics' 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. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for UJU Electronics with six simple checks.

If you're unsure about the strength of UJU Electronics' 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.