WinWay Technology Co., Ltd. (TWSE:6515) P/E Still On Mark After 27% Jump in Share Price

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%.

After the steady jump in price, WinWay Technology’s price-to-earnings (or “P/E”) ratio of 72.5x may make it look like a strong sell right now, compared to the market in Taiwan, where about half of the companies have P/E ratios below 23x and even P/Es below 16x are quite common. Although it would be unwise to just take the P/E at face value, as there may be an explanation for why it is so high.

With earnings declining more than the market lately, WinWay Technology has been very sluggish. Many may have expected the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You would expect it to, otherwise you would be paying a very high price for no particular reason.

Check out our latest review for WinWay Technology

Want the full picture of analyst estimates for the company? Then our free The WinWay Technology report will help you find out what’s coming next.

How is the growth trend of WinWay Technology?

There is an inherent assumption that a company must significantly outperform the market for P/E ratios like WinWay Technology’s to be considered reasonable.

Looking back, the last year saw a disappointing 54% decline in the company’s net profit. This means that there has also been a decline in long-term profits, as EPS has fallen by 1.7% overall over the last three years. Consequently, shareholders would have been disappointed with medium-term earnings growth rates.

Looking ahead now, EPS is expected to rise 153% over the next year, according to the only analyst following the company. With the market expected to deliver just 24%, the company is positioned for a stronger earnings result.

In light of this, it’s understandable that WinWay Technology’s P/E is higher than most other companies. Apparently, shareholders aren’t interested in getting rid of something that is potentially heading towards a more prosperous future.

What can we learn from WinWay Technology’s P/E?

WinWay Technology stock has seen some good momentum lately, which has actually inflated its P/E. It’s been argued that the P/E ratio is an inferior measure of value in certain industries, but it can be a powerful indicator of corporate sentiment.

As we suspected, our examination of WinWay Technology’s analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At the moment, shareholders are comfortable with the P/E as they are fairly confident that future earnings are not under threat. Unless these conditions change, they will continue to provide strong support to the stock price.

What about other risks? Every company has them, and we identify them 3 Warning Signs for WinWay Technology (of which 1 cannot be ignored!) that you should know about.

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

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your objectives or financial situation. Our aim is to bring you long-term focused analysis, driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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