Market Might Still Lack Some Conviction On Loop Telecommunication International,Inc. (TWSE:3025) Even After 31% Share Price Boost

Loop Telecommunication International,Inc. (TWSE:3025) shares have had a really impressive month, gaining 31% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 48%.

Even after such a large jump in price, it's still not a stretch to say that Loop Telecommunication InternationalInc's price-to-earnings (or "P/E") ratio of 22.7x right now seems quite "middle-of-the-road" compared to the market in Taiwan, where the median P/E ratio is around 21x. 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.

Loop Telecommunication InternationalInc 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 wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Loop Telecommunication InternationalInc

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Loop Telecommunication InternationalInc will help you shine a light on its historical performance.

How Is Loop Telecommunication InternationalInc's Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Loop Telecommunication InternationalInc's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 71% last year. Pleasingly, EPS has also lifted 320% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that Loop Telecommunication InternationalInc's P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Loop Telecommunication InternationalInc's P/E

Loop Telecommunication InternationalInc's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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 Loop Telecommunication InternationalInc revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Loop Telecommunication InternationalInc you should be aware of, and 1 of them doesn't sit too well with us.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.