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華爾街日報Mirae Asset Securities Co., Ltd. (KRX:006800) Stocks Shoot Up 31% But Its P/E Still Looks Reasonable
The Mirae Asset Securities Co., Ltd. (KRX:006800) share price has done very well over the last month, posting an excellent gain of 31%. The last month tops off a massive increase of 253% in the last year.
After such a large jump in price, Mirae Asset Securities may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 20.6x, since almost half of all companies in Korea have P/E ratios under 13x and even P/E's lower than 7x are not unusual. 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.
Mirae Asset Securities certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.
Check out our latest analysis for Mirae Asset Securities
What Are Growth Metrics Telling Us About The High P/E?
There's an inherent assumption that a company should far outperform the market for P/E ratios like Mirae Asset Securities' to be considered reasonable.
Retrospectively, the last year delivered an exceptional 59% gain to the company's bottom line. EPS has also lifted 15% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing earnings over that time.
Turning to the outlook, the next year should generate growth of 47% as estimated by the eleven analysts watching the company. That's shaping up to be materially higher than the 36% growth forecast for the broader market.
In light of this, it's understandable that Mirae Asset Securities' P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Bottom Line On Mirae Asset Securities' P/E
Mirae Asset Securities' P/E is flying high just like its stock has during the last month. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that Mirae Asset Securities maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.
Having said that, be aware Mirae Asset Securities is showing 3 warning signs in our investment analysis, and 2 of those don't sit too well with us.
Of course, you might also be able to find a better stock than Mirae Asset Securities. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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