Investors Continue Waiting On Sidelines For DL E&C Co.,Ltd. (KRX:375500)

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") above 15x, you may consider DL E&C Co.,Ltd. (KRX:375500) as an attractive investment with its 10.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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DL E&CLtd 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. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for DL E&CLtd

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

How Is DL E&CLtd's Growth Trending?

DL E&CLtd'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.

Taking a look back first, we see that the company grew earnings per share by an impressive 31% last year. Still, incredibly EPS has fallen 66% in total from three years ago, which is quite disappointing. 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 38% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 19% each year growth forecast for the broader market.

With this information, we find it odd that DL E&CLtd is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

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.

We've established that DL E&CLtd currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for DL E&CLtd 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.