The Nature Holdings Co., Ltd.'s (KOSDAQ:298540) Price Is Right But Growth Is Lacking

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") above 12x, you may consider The Nature Holdings Co., Ltd. (KOSDAQ:298540) as a highly attractive investment with its 3.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times haven't been advantageous for Nature Holdings as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Nature Holdings

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nature Holdings.

Is There Any Growth For Nature Holdings?

Nature Holdings' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Retrospectively, the last year delivered a frustrating 36% decrease to the company's bottom line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 5.6% overall rise in EPS. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 14% each year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the market is forecast to expand by 20% each year, which is noticeably more attractive.

With this information, we can see why Nature Holdings 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.

What We Can Learn From Nature Holdings' P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Nature Holdings 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.

You always need to take note of risks, for example - Nature Holdings has 2 warning signs we think you should be aware of.

If you're unsure about the strength of Nature Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.