Earnings Not Telling The Story For Wireless Power Amplifier Module Inc. (KOSDAQ:332570) After Shares Rise 27%

Wireless Power Amplifier Module Inc. (KOSDAQ:332570) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.4% over the last year.

Following the firm bounce in price, Wireless Power Amplifier Module's price-to-earnings (or "P/E") ratio of 16.8x might make it look like a sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 11x and even P/E's below 6x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

As an illustration, earnings have deteriorated at Wireless Power Amplifier Module over the last year, which is not ideal at all. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Wireless Power Amplifier Module

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Wireless Power Amplifier Module will help you shine a light on its historical performance.

How Is Wireless Power Amplifier Module's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Wireless Power Amplifier Module's is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered a frustrating 26% decrease to the company's bottom line. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 33% shows it's noticeably less attractive on an annualised basis.

With this information, we find it concerning that Wireless Power Amplifier Module is trading at a P/E higher than the market. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Bottom Line On Wireless Power Amplifier Module's P/E

Wireless Power Amplifier Module shares have received a push in the right direction, but its P/E is elevated too. 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 Wireless Power Amplifier Module revealed its three-year earnings trends aren't impacting its high P/E anywhere near as much as we would have predicted, given they look worse than current market expectations. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you settle on your opinion, we've discovered 4 warning signs for Wireless Power Amplifier Module that you should be aware of.

You might be able to find a better investment than Wireless Power Amplifier Module. 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.