Kyung Dong Navien Co., Ltd.'s (KRX:009450) Share Price Is Matching Sentiment Around Its Earnings

Kyung Dong Navien Co., Ltd.'s (KRX:009450) price-to-earnings (or "P/E") ratio of 9.2x might make it look like a buy right now compared to the market in Korea, where around half of the companies have P/E ratios above 14x and even P/E's above 29x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Kyung Dong Navien certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 out of favour.

Check out our latest analysis for Kyung Dong Navien

Want the full picture on analyst estimates for the company? Then our free report on Kyung Dong Navien will help you uncover what's on the horizon.

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

Kyung Dong Navien's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 56%. Pleasingly, EPS has also lifted 67% 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.

Looking ahead now, EPS is anticipated to climb by 4.8% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the market is forecast to expand by 29%, which is noticeably more attractive.

With this information, we can see why Kyung Dong Navien is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

We've established that Kyung Dong Navien maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for Kyung Dong Navien that we have uncovered.

You might be able to find a better investment than Kyung Dong Navien. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.