Sentiment Still Eluding Hold-Key Electric Wire & Cable Co., Ltd (TWSE:1618)

With a price-to-earnings (or "P/E") ratio of 11.4x Hold-Key Electric Wire & Cable Co., Ltd (TWSE:1618) may be sending bullish signals at the moment, given that almost half of all companies in Taiwan have P/E ratios greater than 20x and even P/E's higher than 34x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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Recent times have been quite advantageous for Hold-Key Electric Wire & Cable as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Hold-Key Electric Wire & Cable

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hold-Key Electric Wire & Cable's earnings, revenue and cash flow.

Is There Any Growth For Hold-Key Electric Wire & Cable?

The only time you'd be truly comfortable seeing a P/E as low as Hold-Key Electric Wire & Cable's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 85% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 257% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 18% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Hold-Key Electric Wire & Cable's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From Hold-Key Electric Wire & Cable's 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.

Our examination of Hold-Key Electric Wire & Cable 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.

Before you take the next step, you should know about the 1 warning sign for Hold-Key Electric Wire & Cable that we have uncovered.

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.

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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.