Winway Technology Co., Ltd. (TWSE:6515) shares have risen 27% and remain at fair value.

Winway Technology Co., Ltd. (TWSE:6515) shares have maintained their recent momentum, rising 27% in the last month alone, with the annualized gain over the past 30 days being a very steep 28%.

After the stock price surged, WinWay Technology’s price-to-earnings (P/E) is now at 72.5x, which may seem like a strong selloff at the moment compared to the Taiwanese market, where roughly half of the companies have a P/E ratio below 23x, and P/Es below 16x are also quite common. However, it would be unwise to take the P/E at face value, as there may be a reason why the P/E is so high.

Winway Technology has been performing very poorly recently with earnings trailing the market. Many are expecting a strong recovery from this dismal earnings performance, which may be limiting the decline in its P/E ratio. We really hope so; if not, you’ll be paying a fairly high price for no real reason.

Check out our latest analysis for WinWay Technology

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What is the growth trend of WinWay Technology?

There is an inherent assumption that for a P/E ratio like WinWay Technology’s to be considered reasonable, the company must perform much better than the market.

Looking back, last year was a disappointing 54% decline in the company’s bottom line. This means that EPS has fallen a total of 1.7% over the past three years, meaning that earnings will also decline over the long term. Therefore, shareholders would be pessimistic about the medium-term earnings growth rate.

Looking ahead, the only analyst tracking the company expects EPS to rise 153% within the next year, putting the company poised to deliver stronger earnings results while the market is predicted to achieve just 24%.

With this in mind, it’s understandable that WinWay Technology’s P/E is higher than most other companies – it seems shareholders are not very keen to sell a company that could potentially have a more prosperous future.

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

WinWay Technology’s stock has been experiencing positive momentum recently, with its price-to-earnings ratio rising strongly. While price-to-earnings ratios are said to be a poor gauge of value in certain industries, they can be a strong business sentiment indicator.

As expected, a look at analyst forecasts for WinWay Technology reveals that the company’s strong earnings outlook is contributing to its high P/E. Currently, shareholders are comfortable with the P/E as they are confident that future earnings will not be threatened. As long as these conditions remain unchanged, the share price will continue to be strongly supported.

So what about other risks? Every company has risks. We 3 warning signs for WinWay Technology (One of them you can’t ignore!) It’s something you should know about.

If you are Concerns about WinWay Technology’s business strengthTo see other companies you might have missed, be sure to check out our interactive list of stocks with solid fundamentals.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. 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 of the stocks mentioned.

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