Why Investors Shouldn't Be Surprised By T'Way Air Co., Ltd.'s (KRX:091810) 27% Share Price Surge

T'Way Air Co., Ltd. (KRX:091810) shareholders have had their patience rewarded with a 27% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 43% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about T'Way Air's P/E ratio of 10.8x, since the median price-to-earnings (or "P/E") ratio in Korea is also close to 11x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

T'Way Air certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for T'Way Air

Want the full picture on analyst estimates for the company? Then our free report on T'Way Air will help you uncover what's on the horizon.

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

The only time you'd be comfortable seeing a P/E like T'Way Air's is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company grew earnings per share by an impressive 168% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 21% each year as estimated by the six analysts watching the company. That's shaping up to be similar to the 19% per year growth forecast for the broader market.

With this information, we can see why T'Way Air is trading at a fairly similar P/E to the market. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Its shares have lifted substantially and now T'Way Air's P/E is also back up to the market median. 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.

We've established that T'Way Air maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction 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 T'Way Air that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.