Global Lighting Technologies Inc.'s (TWSE:4935) 25% Share Price Surge Not Quite Adding Up

Global Lighting Technologies Inc. (TWSE:4935) shares have continued their recent momentum with a 25% gain in the last month alone. Unfortunately, despite the strong performance over the last month, the full year gain of 9.8% isn't as attractive.

Although its price has surged higher, there still wouldn't be many who think Global Lighting Technologies' price-to-earnings (or "P/E") ratio of 25.3x is worth a mention when the median P/E in Taiwan is similar at about 23x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

As an illustration, earnings have deteriorated at Global Lighting Technologies over the last year, which is not ideal at all. One possibility is that the P/E is moderate because investors think the company might still do enough to be in line with the broader market in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for Global Lighting Technologies

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 Global Lighting Technologies' earnings, revenue and cash flow.

How Is Global Lighting Technologies' Growth Trending?

Global Lighting Technologies' 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.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 68%. As a result, earnings from three years ago have also fallen 75% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Comparing that to the market, which is predicted to deliver 27% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we find it concerning that Global Lighting Technologies is trading at a fairly similar P/E to the market. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Final Word

Its shares have lifted substantially and now Global Lighting Technologies' P/E is also back up to the market median. 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 Global Lighting Technologies revealed its shrinking earnings over the medium-term aren't impacting its P/E as much as we would have predicted, given the market is set to grow. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

You should always think about risks. Case in point, we've spotted 2 warning signs for Global Lighting Technologies you should be aware of.

If these risks are making you reconsider your opinion on Global Lighting Technologies, 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.