Sebang Global Battery Co., Ltd. (KRX:004490) Looks Inexpensive But Perhaps Not Attractive Enough

With a price-to-earnings (or "P/E") ratio of 4.7x Sebang Global Battery Co., Ltd. (KRX:004490) may be sending very bullish signals at the moment, given that almost half of all companies in Korea have P/E ratios greater than 11x and even P/E's higher than 22x 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.

Recent times have been advantageous for Sebang Global Battery as its earnings have been rising faster than most other companies. 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 Sebang Global Battery

Keen to find out how analysts think Sebang Global Battery's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Sebang Global Battery?

The only time you'd be truly comfortable seeing a P/E as depressed as Sebang Global Battery's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 119% gain to the company's bottom line. The latest three year period has also seen an excellent 141% 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.

Looking ahead now, EPS is anticipated to slump, contracting by 7.3% during the coming year according to the one analyst following the company. Meanwhile, the broader market is forecast to expand by 33%, which paints a poor picture.

In light of this, it's understandable that Sebang Global Battery's P/E would sit below the majority of other companies. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Key Takeaway

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Sebang Global Battery maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Sebang Global Battery with six simple checks will allow you to discover any risks that could be an issue.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.