NH Investment & Securities Co., Ltd. (KRX:005940) Shares Fly 28% But Investors Aren't Buying For Growth

Despite an already strong run, NH Investment & Securities Co., Ltd. (KRX:005940) shares have been powering on, with a gain of 28% in the last thirty days. The last 30 days bring the annual gain to a very sharp 63%.

In spite of the firm bounce in price, given about half the companies in Korea have price-to-earnings ratios (or "P/E's") above 13x, you may still consider NH Investment & Securities as an attractive investment with its 10.7x 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 limited.

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NH Investment & Securities 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.

View our latest analysis for NH Investment & Securities

If you'd like to see what analysts are forecasting going forward, you should check out our free report on NH Investment & Securities.

How Is NH Investment & Securities' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as NH Investment & Securities' is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a worthy increase of 13%. Still, lamentably EPS has fallen 23% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 7.1% per annum over the next three years. With the market predicted to deliver 18% growth per year, the company is positioned for a weaker earnings result.

With this information, we can see why NH Investment & Securities 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.

The Final Word

The latest share price surge wasn't enough to lift NH Investment & Securities' P/E close to the market median. 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.

As we suspected, our examination of NH Investment & Securities' 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. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for NH Investment & Securities you should be aware of, and 1 of them is potentially serious.

Of course, you might also be able to find a better stock than NH Investment & Securities. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.