Subdued Growth No Barrier To Taiwan Pelican Express Co., Ltd. (TWSE:2642) With Shares Advancing 32%

Taiwan Pelican Express Co., Ltd. (TWSE:2642) shareholders would be excited to see that the share price has had a great month, posting a 32% gain and recovering from prior weakness. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, given close to half the companies in Taiwan have price-to-earnings ratios (or "P/E's") below 21x, you may consider Taiwan Pelican Express as a stock to avoid entirely with its 56.2x P/E ratio. 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.

For example, consider that Taiwan Pelican Express' financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is high because investors think the company will still do 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.

Check out our latest analysis for Taiwan Pelican Express

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 Taiwan Pelican Express' earnings, revenue and cash flow.

How Is Taiwan Pelican Express' Growth Trending?

Taiwan Pelican Express' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered a frustrating 33% 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 68% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 24% shows it's an unpleasant look.

In light of this, it's alarming that Taiwan Pelican Express' P/E sits above the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very 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.

What We Can Learn From Taiwan Pelican Express' P/E?

The strong share price surge has got Taiwan Pelican Express' P/E rushing to great heights as well. 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 Taiwan Pelican Express revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Taiwan Pelican Express (1 is potentially serious) you should be aware of.

You might be able to find a better investment than Taiwan Pelican Express. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.