Further Upside For Hanla IMS Co., Ltd. (KOSDAQ:092460) Shares Could Introduce Price Risks After 42% Bounce

Despite an already strong run, Hanla IMS Co., Ltd. (KOSDAQ:092460) shares have been powering on, with a gain of 42% in the last thirty days. The last month tops off a massive increase of 164% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Hanla IMS' P/E ratio of 15.5x, since the median price-to-earnings (or "P/E") ratio in Korea is also close to 15x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Recent times have been quite advantageous for Hanla IMS as its earnings have been rising very briskly. 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.

See our latest analysis for Hanla IMS

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hanla IMS' earnings, revenue and cash flow.

Does Growth Match The P/E?

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

Retrospectively, the last year delivered an exceptional 77% gain to the company's bottom line. The latest three year period has also seen an excellent 160% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 32% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Hanla IMS is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Hanla IMS' P/E?

Its shares have lifted substantially and now Hanla IMS' P/E is also back up to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Hanla IMS currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You need to take note of risks, for example - Hanla IMS has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

You might be able to find a better investment than Hanla IMS. 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.