There's No Escaping SNT Motiv Co., Ltd.'s (KRX:064960) Muted Earnings Despite A 28% Share Price Rise

SNT Motiv Co., Ltd. (KRX:064960) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 18% is also fairly reasonable.

Even after such a large jump in price, given about half the companies in Korea have price-to-earnings ratios (or "P/E's") above 12x, you may still consider SNT Motiv as an attractive investment with its 8.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

SNT Motiv hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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 SNT Motiv

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

How Is SNT Motiv's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as SNT Motiv's is when the company's growth is on track to lag the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 23%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 18% overall rise in EPS. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 17% over the next year. That's shaping up to be materially lower than the 33% growth forecast for the broader market.

In light of this, it's understandable that SNT Motiv's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The latest share price surge wasn't enough to lift SNT Motiv's P/E close to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of SNT Motiv's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for SNT Motiv that you need to be mindful of.

Of course, you might also be able to find a better stock than SNT Motiv. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.