Investors Aren't Buying CS Wind Corporation's (KRX:112610) Earnings

With a price-to-earnings (or "P/E") ratio of 9.2x CS Wind Corporation (KRX:112610) may be sending bullish signals at the moment, given that almost half of all companies in Korea have P/E ratios greater than 14x and even P/E's higher than 30x are not unusual. 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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CS Wind 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for CS Wind

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

Is There Any Growth For CS Wind?

There's an inherent assumption that a company should underperform the market for P/E ratios like CS Wind's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 91% last year. The strong recent performance means it was also able to grow EPS by 1,284% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to slump, contracting by 5.8% during the coming year according to the six analysts following the company. That's not great when the rest of the market is expected to grow by 37%.

With this information, we are not surprised that CS Wind is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On CS Wind's 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.

As we suspected, our examination of CS Wind's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for CS Wind that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.