Hor Kew Corporation Limited (SGX:BBP) shares have continued their recent momentum with a 44% gain in the last month alone. The annual gain comes to 200% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, Hor Kew may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 2.7x, since almost half of all companies in Singapore have P/E ratios greater than 12x and even P/E's higher than 21x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

With earnings growth that's exceedingly strong of late, Hor Kew has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Hor Kew

Although there are no analyst estimates available for Hor Kew, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Hor Kew's Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Hor Kew's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 85%. The latest three year period has also seen an excellent 242% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 16% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Hor Kew's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Hor Kew's P/E?

Even after such a strong price move, Hor Kew's P/E still trails the rest of the market significantly. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Hor Kew currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Hor Kew (of which 1 is a bit concerning!) you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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