Market Cool On Daewoo Engineering & Construction Co., Ltd.'s (KRX:047040) Earnings

Daewoo Engineering & Construction Co., Ltd.'s (KRX:047040) price-to-earnings (or "P/E") ratio of 7.7x 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 12x and even P/E's above 26x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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While the market has experienced earnings growth lately, Daewoo Engineering & Construction's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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 Daewoo Engineering & Construction

Keen to find out how analysts think Daewoo Engineering & Construction's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Daewoo Engineering & Construction's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Daewoo Engineering & Construction's is when the company's growth is on track to lag the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 60%. The last three years don't look nice either as the company has shrunk EPS by 59% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 25% each year during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 17% per year growth forecast for the broader market.

In light of this, it's peculiar that Daewoo Engineering & Construction's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Daewoo Engineering & Construction's P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Daewoo Engineering & Construction's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Daewoo Engineering & Construction (1 shouldn't be ignored!) that you need to be mindful of.

Of course, you might also be able to find a better stock than Daewoo Engineering & Construction. 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.