Semyung Electric Machinery Co.,Ltd's (KOSDAQ:017510) Share Price Is Still Matching Investor Opinion Despite 25% Slump

The Semyung Electric Machinery Co.,Ltd (KOSDAQ:017510) share price has fared very poorly over the last month, falling by a substantial 25%. Looking at the bigger picture, even after this poor month the stock is up 44% in the last year.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Semyung Electric MachineryLtd's P/E ratio of 12x, since the median price-to-earnings (or "P/E") ratio in Korea is also close to 11x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's exceedingly strong of late, Semyung Electric MachineryLtd has been doing very well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

View our latest analysis for Semyung Electric MachineryLtd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Semyung Electric MachineryLtd will help you shine a light on its historical performance.

Does Growth Match The P/E?

In order to justify its P/E ratio, Semyung Electric MachineryLtd would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 209%. Pleasingly, EPS has also lifted 133% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

It's interesting to note that the rest of the market is similarly expected to grow by 33% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why Semyung Electric MachineryLtd is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

The Key Takeaway

Following Semyung Electric MachineryLtd's share price tumble, its P/E is now hanging on to the median market P/E. 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.

We've established that Semyung Electric MachineryLtd maintains its moderate P/E off the back of its recent three-year growth being in line with the wider market forecast, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Semyung Electric MachineryLtd (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

Of course, you might also be able to find a better stock than Semyung Electric MachineryLtd. 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.