Many Still Looking Away From ASE Technology Holding Co., Ltd. (TWSE:3711)

With a median price-to-earnings (or "P/E") ratio of close to 20x in Taiwan, you could be forgiven for feeling indifferent about ASE Technology Holding Co., Ltd.'s (TWSE:3711) P/E ratio of 21.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

ASE Technology Holding hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

See our latest analysis for ASE Technology Holding

If you'd like to see what analysts are forecasting going forward, you should check out our free report on ASE Technology Holding.

Is There Some Growth For ASE Technology Holding?

ASE Technology Holding's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 16%. This means it has also seen a slide in earnings over the longer-term as EPS is down 25% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 31% over the next year. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that ASE Technology Holding is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On ASE Technology Holding's P/E

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of ASE Technology Holding's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you settle on your opinion, we've discovered 1 warning sign for ASE Technology Holding that you should be aware of.

Of course, you might also be able to find a better stock than ASE Technology Holding. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.