Little Excitement Around Di Dong Il Corporation's (KRX:001530) Earnings

Di Dong Il Corporation's (KRX:001530) price-to-earnings (or "P/E") ratio of 16.3x 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 20x and even P/E's above 43x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Di Dong Il certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Di Dong Il

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

How Is Di Dong Il's Growth Trending?

Di Dong Il'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.

If we review the last year of earnings growth, the company posted a terrific increase of 81%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. 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 13% each year as estimated by the one analyst watching the company. With the market predicted to deliver 23% growth per year, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Di Dong Il's P/E sits below the majority of other companies. 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 Di Dong Il'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.

We've established that Di Dong Il 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.

It is also worth noting that we have found 4 warning signs for Di Dong Il (1 doesn't sit too well with us!) that you need to take into consideration.

Of course, you might also be able to find a better stock than Di Dong Il. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.

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This article by Simply Wall St is general in nature. 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.
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