JS Corporation's (KRX:194370) Price Is Right But Growth Is Lacking After Shares Rocket 59%

The JS Corporation (KRX:194370) share price has done very well over the last month, posting an excellent gain of 59%. Looking back a bit further, it's encouraging to see the stock is up 35% in the last year.

In spite of the firm bounce in price, JS may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.3x, since almost half of all companies in Korea have P/E ratios greater than 13x and even P/E's higher than 26x are not unusual. 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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For example, consider that JS' financial performance has been poor lately as its earnings have been in decline. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for JS

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on JS' earnings, revenue and cash flow.

Is There Any Growth For JS?

There's an inherent assumption that a company should far underperform the market for P/E ratios like JS' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's bottom line. Even so, admirably EPS has lifted 47% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 21% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that JS' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On JS' P/E

JS' recent share price jump still sees its P/E sitting firmly flat on the ground. 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 JS maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 4 warning signs for JS (1 is a bit unpleasant!) that we have uncovered.

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.