Youngone Corporation's (KRX:111770) Earnings Are Not Doing Enough For Some Investors

Youngone Corporation's (KRX:111770) price-to-earnings (or "P/E") ratio of 6.6x might make it look like a strong buy right now compared to the market in Korea, where around half of the companies have P/E ratios above 15x and even P/E's above 32x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

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With earnings that are retreating more than the market's of late, Youngone has been very sluggish. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Youngone

Want the full picture on analyst estimates for the company? Then our free report on Youngone will help you uncover what's on the horizon.

How Is Youngone's Growth Trending?

Youngone's 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.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 22%. As a result, earnings from three years ago have also fallen 16% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 10% per annum over the next three years. That's shaping up to be materially lower than the 18% per year growth forecast for the broader market.

With this information, we can see why Youngone 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 Youngone's P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Youngone's analyst forecasts revealed that its inferior earnings outlook 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.

You always need to take note of risks, for example - Youngone has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.