Benign Growth For Taiwan Sakura Corporation (TWSE:9911) Underpins Its Share Price

With a price-to-earnings (or "P/E") ratio of 17.6x Taiwan Sakura Corporation (TWSE:9911) may be sending bullish signals at the moment, given that almost half of all companies in Taiwan have P/E ratios greater than 23x and even P/E's higher than 41x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Earnings have risen firmly for Taiwan Sakura recently, which is pleasing to see. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Taiwan Sakura

Although there are no analyst estimates available for Taiwan Sakura, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Taiwan Sakura's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Taiwan Sakura's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 29% gain to the company's bottom line. As a result, it also grew EPS by 18% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 24% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that Taiwan Sakura's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

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.

As we suspected, our examination of Taiwan Sakura revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Taiwan Sakura with six simple checks.

If these risks are making you reconsider your opinion on Taiwan Sakura, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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