Investors Interested In Acer e-Enabling Service Business Inc.'s (GTSM:6811) Earnings

With a price-to-earnings (or "P/E") ratio of 32.8x Acer e-Enabling Service Business Inc. (GTSM:6811) may be sending very bearish signals at the moment, given that almost half of all companies in Taiwan have P/E ratios under 20x and even P/E's lower than 14x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

With earnings growth that's exceedingly strong of late, Acer e-Enabling Service Business has been doing very well. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Acer e-Enabling Service Business

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 Acer e-Enabling Service Business' earnings, revenue and cash flow.

How Is Acer e-Enabling Service Business' Growth Trending?

In order to justify its P/E ratio, Acer e-Enabling Service Business would need to produce outstanding growth well in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 79%. The strong recent performance means it was also able to grow EPS by 682% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 24% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we can see why Acer e-Enabling Service Business is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

What We Can Learn From Acer e-Enabling Service Business' 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 Acer e-Enabling Service Business revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Acer e-Enabling Service Business, and understanding should be part of your investment process.

Of course, you might also be able to find a better stock than Acer e-Enabling Service Business. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.

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