A Piece Of The Puzzle Missing From Unitrontech Co., Ltd.'s (KOSDAQ:142210) 27% Share Price Climb

Unitrontech Co., Ltd. (KOSDAQ:142210) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 54%.

Although its price has surged higher, Unitrontech may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8.9x, since almost half of all companies in Korea have P/E ratios greater than 13x and even P/E's higher than 28x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

For instance, Unitrontech's receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

See our latest analysis for Unitrontech

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

How Is Unitrontech's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Unitrontech's is when the company's growth is on track to lag the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 45%. Even so, admirably EPS has lifted 601% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Comparing that to the market, which is only predicted to deliver 31% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Unitrontech is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Unitrontech's P/E

Unitrontech's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Unitrontech revealed its three-year earnings trends aren't contributing to its P/E anywhere near 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 significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

You need to take note of risks, for example - Unitrontech has 5 warning signs (and 1 which is significant) we think you should know about.

If these risks are making you reconsider your opinion on Unitrontech, 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.