It's Down 26% But WOORIM POWER TRAIN SOLUTION Co., Ltd. (KOSDAQ:101170) Could Be Riskier Than It Looks

The WOORIM POWER TRAIN SOLUTION Co., Ltd. (KOSDAQ:101170) share price has fared very poorly over the last month, falling by a substantial 26%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 28% share price drop.

Even after such a large drop in price, it's still not a stretch to say that WOORIM POWER TRAIN SOLUTION's price-to-earnings (or "P/E") ratio of 10.5x right now seems quite "middle-of-the-road" compared to the market in Korea, where the median P/E ratio is around 11x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been advantageous for WOORIM POWER TRAIN SOLUTION as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for WOORIM POWER TRAIN SOLUTION

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

Is There Some Growth For WOORIM POWER TRAIN SOLUTION?

The only time you'd be comfortable seeing a P/E like WOORIM POWER TRAIN SOLUTION's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 117%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 45% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 33% growth forecast for the broader market.

In light of this, it's curious that WOORIM POWER TRAIN SOLUTION's P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

With its share price falling into a hole, the P/E for WOORIM POWER TRAIN SOLUTION looks quite average now. 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.

Our examination of WOORIM POWER TRAIN SOLUTION's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you settle on your opinion, we've discovered 1 warning sign for WOORIM POWER TRAIN SOLUTION that you should be aware of.

If these risks are making you reconsider your opinion on WOORIM POWER TRAIN SOLUTION, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.