Steel

Century Iron and Steel Industrial Co.,Ltd. (TWSE:9958) Not Lagging Market On Growth Or Pricing

Century Iron and Steel Industrial Co.,Ltd.’s (TWSE:9958) price-to-earnings (or “P/E”) ratio of 48.4x might make it look like a strong sell right now compared to the market in Taiwan, where around half of the companies have P/E ratios below 23x and even P/E’s below 15x are quite common. 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.

Recent times have been pleasing for Century Iron and Steel IndustrialLtd as its earnings have risen in spite of the market’s earnings going into reverse. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You’d really hope so, otherwise you’re paying a pretty hefty price for no particular reason.

See our latest analysis for Century Iron and Steel IndustrialLtd

pe-multiple-vs-industry
TWSE:9958 Price to Earnings Ratio vs Industry April 2nd 2024

Keen to find out how analysts think Century Iron and Steel IndustrialLtd’s future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The High P/E?

Century Iron and Steel IndustrialLtd’s 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 an exceptional 180% gain to the company’s bottom line. EPS has also lifted 22% 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.

Looking ahead now, EPS is anticipated to climb by 120% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 26%, which is noticeably less attractive.

In light of this, it’s understandable that Century Iron and Steel IndustrialLtd’s P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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.

As we suspected, our examination of Century Iron and Steel IndustrialLtd’s analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

We don’t want to rain on the parade too much, but we did also find 4 warning signs for Century Iron and Steel IndustrialLtd (2 make us uncomfortable!) that you need to be mindful of.

If you’re unsure about the strength of Century Iron and Steel IndustrialLtd’s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Valuation is complex, but we’re helping make it simple.

Find out whether Century Iron and Steel IndustrialLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.


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