COWINTECH Co. Ltd. (KOSDAQ:282880) Shares Slammed 29% But Getting In Cheap Might Be Difficult Regardless

To the annoyance of some shareholders, COWINTECH Co. Ltd. (KOSDAQ:282880) shares are down a considerable 29% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 59% share price decline.

Although its price has dipped substantially, COWINTECH may still be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 17x, since almost half of all companies in Korea have P/E ratios under 11x and even P/E's lower than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

COWINTECH certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It seems that many are expecting the company to continue defying the broader market adversity, 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.

See our latest analysis for COWINTECH

If you'd like to see what analysts are forecasting going forward, you should check out our free report on COWINTECH.

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, COWINTECH would need to produce impressive growth in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 86%. Pleasingly, EPS has also lifted 134% 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.

Turning to the outlook, the next three years should generate growth of 28% per annum as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 20% per annum growth forecast for the broader market.

In light of this, it's understandable that COWINTECH's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Despite the recent share price weakness, COWINTECH's P/E remains higher than most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of COWINTECH's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for COWINTECH that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.

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