Horizon Securities Co., Ltd. (GTSM:6015) Stock Rockets 36% But Many Are Still Ignoring The Company

Horizon Securities Co., Ltd. (GTSM:6015) shares have had a really impressive month, gaining 36% after a shaky period beforehand. The annual gain comes to 201% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Horizon Securities may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.9x, since almost half of all companies in Taiwan have P/E ratios greater than 21x and even P/E's higher than 39x 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.

With earnings growth that's exceedingly strong of late, Horizon Securities has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Horizon Securities

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 Horizon Securities' earnings, revenue and cash flow.

How Is Horizon Securities' Growth Trending?

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

If we review the last year of earnings growth, the company posted a terrific increase of 219%. The latest three year period has also seen an excellent 118% overall rise in EPS, aided by its short-term performance. 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 25% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that Horizon Securities is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Horizon Securities' P/E

Despite Horizon Securities' shares building up a head of steam, its P/E still lags most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Horizon Securities 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. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Horizon Securities (1 is a bit concerning) you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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This article by Simply Wall St is general in nature. 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.
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