When close to half the companies in Taiwan have price-to-earnings ratios (or "P/E's") above 19x, you may consider ThinTech Materials Technology Co., Ltd. (GTSM:3663) as an attractive investment with its 15x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
ThinTech Materials Technology certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 ThinTech Materials Technology
Does Growth Match The Low P/E?
The only time you'd be truly comfortable seeing a P/E as low as ThinTech Materials Technology's is when the company's growth is on track to lag the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 45% last year. The strong recent performance means it was also able to grow EPS by 139% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Comparing that to the market, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.
In light of this, it's peculiar that ThinTech Materials Technology'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.
The Final Word
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 ThinTech Materials Technology 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. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. 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.
You always need to take note of risks, for example - ThinTech Materials Technology has 2 warning signs we think you should be aware of.
You might be able to find a better investment than ThinTech Materials Technology. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).
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Access Free AnalysisThis 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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