Kyochon Food&Beverage Co., Ltd.'s (KRX:339770) Shares Leap 26% Yet They're Still Not Telling The Full Story

Kyochon Food&Beverage Co., Ltd. (KRX:339770) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, there still wouldn't be many who think Kyochon Food&Beverage's price-to-earnings (or "P/E") ratio of 14.1x is worth a mention when the median P/E in Korea is similar at about 13x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Kyochon Food&Beverage 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 moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Kyochon Food&Beverage

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

Does Growth Match The P/E?

Kyochon Food&Beverage's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings growth, the company posted a terrific increase of 425%. However, this wasn't enough as the latest three year period has seen a very unpleasant 35% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 34% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 18% per year, which is noticeably less attractive.

With this information, we find it interesting that Kyochon Food&Beverage is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Kyochon Food&Beverage appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

Our examination of Kyochon Food&Beverage's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Kyochon Food&Beverage that 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.