Why We're Not Concerned About Mirai Semiconductors Co., Ltd.'s (KOSDAQ:254490) Share Price

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 10x, you may consider Mirai Semiconductors Co., Ltd. (KOSDAQ:254490) as a stock to avoid entirely with its 26.6x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Mirai Semiconductors 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Mirai Semiconductors

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

Is There Enough Growth For Mirai Semiconductors?

The only time you'd be truly comfortable seeing a P/E as steep as Mirai Semiconductors' is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 44% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 66% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 132% as estimated by the sole analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 27%, which is noticeably less attractive.

With this information, we can see why Mirai Semiconductors is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Mirai Semiconductors' P/E?

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 Mirai Semiconductors' 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. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Mirai Semiconductors that you need to be mindful of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.