The Price Is Right For Oriental Precision & Engineering Co.,Ltd. (KOSDAQ:014940) Even After Diving 26%

The Oriental Precision & Engineering Co.,Ltd. (KOSDAQ:014940) share price has softened a substantial 26% over the previous 30 days, handing back much of the gains the stock has made lately. Still, a bad month hasn't completely ruined the past year with the stock gaining 81%, which is great even in a bull market.

Although its price has dipped substantially, Oriental Precision & EngineeringLtd may still be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 16.1x, since almost half of all companies in Korea have P/E ratios under 13x and even P/E's lower than 7x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Recent times have been quite advantageous for Oriental Precision & EngineeringLtd as its earnings have been rising very briskly. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Oriental Precision & EngineeringLtd

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Oriental Precision & EngineeringLtd's earnings, revenue and cash flow.

How Is Oriental Precision & EngineeringLtd's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Oriental Precision & EngineeringLtd's is when the company's growth is on track to outshine the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 31% last year. The latest three year period has also seen an excellent 195% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 35% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's understandable that Oriental Precision & EngineeringLtd's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

What We Can Learn From Oriental Precision & EngineeringLtd's P/E?

There's still some solid strength behind Oriental Precision & EngineeringLtd's P/E, if not its share price lately. 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 Oriental Precision & EngineeringLtd maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - Oriental Precision & EngineeringLtd has 1 warning sign we think you should be aware of.

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

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

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.