SAMWHA CAPACITOR Co.,LTD's (KRX:001820) P/E Is Still On The Mark Following 32% Share Price Bounce

Those holding SAMWHA CAPACITOR Co.,LTD (KRX:001820) shares would be relieved that the share price has rebounded 32% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.

Since its price has surged higher, SAMWHA CAPACITORLTD's price-to-earnings (or "P/E") ratio of 18.1x might make it look like a strong 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. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

SAMWHA CAPACITORLTD could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out our latest analysis for SAMWHA CAPACITORLTD

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

What Are Growth Metrics Telling Us About The High P/E?

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

Retrospectively, the last year delivered a frustrating 31% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 43% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 71% over the next year. With the market only predicted to deliver 34%, the company is positioned for a stronger earnings result.

With this information, we can see why SAMWHA CAPACITORLTD 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 SAMWHA CAPACITORLTD's P/E?

Shares in SAMWHA CAPACITORLTD have built up some good momentum lately, which has really inflated its P/E. 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 SAMWHA CAPACITORLTD maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.

You should always think about risks. Case in point, we've spotted 2 warning signs for SAMWHA CAPACITORLTD you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.