WinWay Technology Co., Ltd.'s (TWSE:6515) P/E Is Still On The Mark Following 27% Share Price Bounce

WinWay Technology Co., Ltd. (TWSE:6515) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 28%.

Following the firm bounce in price, WinWay Technology's price-to-earnings (or "P/E") ratio of 72.5x might make it look like a strong sell right now compared to the market in Taiwan, where around half of the companies have P/E ratios below 23x and even P/E's below 16x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings that are retreating more than the market's of late, WinWay Technology has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for WinWay Technology

Want the full picture on analyst estimates for the company? Then our free report on WinWay Technology will help you uncover what's on the horizon.

How Is WinWay Technology's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like WinWay Technology's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 54% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 1.7% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 153% during the coming year according to the only analyst following the company. With the market only predicted to deliver 24%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that WinWay Technology's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From WinWay Technology's P/E?

Shares in WinWay Technology have built up some good momentum lately, which has really inflated its 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.

As we suspected, our examination of WinWay Technology's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for WinWay Technology (of which 1 can't be ignored!) you should know about.

If you're unsure about the strength of WinWay Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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

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