Investors Appear Satisfied With HD Hyundai Heavy Industries Co.,Ltd.'s (KRX:329180) Prospects

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 14x, you may consider HD Hyundai Heavy Industries Co.,Ltd. (KRX:329180) as a stock to avoid entirely with its 57.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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HD Hyundai Heavy IndustriesLtd 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.

View our latest analysis for HD Hyundai Heavy IndustriesLtd

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

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as HD Hyundai Heavy IndustriesLtd's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 358%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 43% per year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 21% each year, which is noticeably less attractive.

In light of this, it's understandable that HD Hyundai Heavy IndustriesLtd'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 Bottom Line On HD Hyundai Heavy IndustriesLtd's P/E

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that HD Hyundai Heavy IndustriesLtd maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for HD Hyundai Heavy IndustriesLtd with six simple checks on some of these key factors.

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.