Stock Analysis

Positive Sentiment Still Eludes KBC Corporation, Ltd. (SHSE:688598) Following 26% Share Price Slump

SHSE:688598
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Unfortunately for some shareholders, the KBC Corporation, Ltd. (SHSE:688598) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 69% loss during that time.

Even after such a large drop in price, KBC Corporation's price-to-earnings (or "P/E") ratio of 25.4x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 30x and even P/E's above 53x 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 limited.

KBC Corporation could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for KBC Corporation

pe-multiple-vs-industry
SHSE:688598 Price to Earnings Ratio vs Industry April 25th 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on KBC Corporation.

How Is KBC Corporation's Growth Trending?

In order to justify its P/E ratio, KBC Corporation would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 66% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 7.1% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 171% over the next year. That's shaping up to be materially higher than the 35% growth forecast for the broader market.

In light of this, it's peculiar that KBC Corporation's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

KBC Corporation's recently weak share price has pulled its P/E below most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that KBC Corporation currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for KBC Corporation that you should be aware of.

You might be able to find a better investment than KBC Corporation. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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

Find out whether KBC Corporation 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

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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.