Stock Analysis

Foxwell Power Co., Ltd. (TWSE:6994) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

TWSE:6994
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Unfortunately for some shareholders, the Foxwell Power Co., Ltd. (TWSE:6994) share price has dived 26% in the last thirty days, prolonging recent pain. Still, a bad month hasn't completely ruined the past year with the stock gaining 34%, which is great even in a bull market.

In spite of the heavy fall in price, given close to half the companies in Taiwan have price-to-earnings ratios (or "P/E's") below 20x, you may still consider Foxwell Power as a stock to avoid entirely with its 74.3x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Foxwell Power as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Foxwell Power

pe-multiple-vs-industry
TWSE:6994 Price to Earnings Ratio vs Industry January 16th 2025
Want the full picture on analyst estimates for the company? Then our free report on Foxwell Power will help you uncover what's on the horizon.

How Is Foxwell Power's Growth Trending?

In order to justify its P/E ratio, Foxwell Power would need to produce outstanding growth well in excess of the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 103% last year. The strong recent performance means it was also able to grow EPS by 502% 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.

Turning to the outlook, the next year should generate growth of 57% as estimated by the one analyst watching the company. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.

With this information, we can see why Foxwell Power is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Foxwell Power's P/E

Even after such a strong price drop, Foxwell Power's P/E still exceeds the rest of the market significantly. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Foxwell Power's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Foxwell Power.

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.