StemCell Therapy

When close to half the companies in Taiwan have price-to-earnings ratios (or P/Es) below 18x, you may consider Universal Vision Biotechnology Co., Ltd. (GTSM:3218) as a stock to avoid entirely with its 65.8x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if its justified.

With earnings growth thats superior to most other companies of late, Universal Vision Biotechnology has been doing relatively well. 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.

See our latest analysis for Universal Vision Biotechnology

Theres an inherent assumption that a company should far outperform the market for P/E ratios like Universal Vision Biotechnologys to be considered reasonable.

Retrospectively, the last year delivered an exceptional 51% gain to the companys bottom line. Pleasingly, EPS has also lifted 183% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 44% per annum over the next three years. With the market only predicted to deliver 8.8% per annum, the company is positioned for a stronger earnings result.

With this information, we can see why Universal Vision Biotechnology is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

While the price-to-earnings ratio shouldnt be the defining factor in whether you buy a stock or not, its quite a capable barometer of earnings expectations.

As we suspected, our examination of Universal Vision Biotechnologys 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 arent under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, weve spotted 1 warning sign for Universal Vision Biotechnology you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a P/E below 20x.

PromotedIf youre looking to trade Universal Vision Biotechnology, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.

This article by Simply Wall St is general in nature. 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. *Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

Go here to read the rest:
Market Participants Recognise Universal Vision Biotechnology Co., Ltd.s (GTSM:3218) Earnings - Simply Wall St

This entry was posted on September 15, 2020 at 11:14 am and is filed under Biotechnology. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. |