Pinning Down Mirae Asset Securities Co., Ltd.'s (KRX:006800) P/E Is Difficult Right Now

There wouldn't be many who think Mirae Asset Securities Co., Ltd.'s (KRX:006800) price-to-earnings (or "P/E") ratio of 14.2x is worth a mention when the median P/E in Korea is similar at about 15x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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With its earnings growth in positive territory compared to the declining earnings of most other companies, Mirae Asset Securities has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. 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 not quite in favour.

See our latest analysis for Mirae Asset Securities

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

Is There Some Growth For Mirae Asset Securities?

In order to justify its P/E ratio, Mirae Asset Securities would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 182%. However, this wasn't enough as the latest three year period has seen a very unpleasant 8.0% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 10% each year during the coming three years according to the eleven analysts following the company. With the market predicted to deliver 18% growth per year, the company is positioned for a weaker earnings result.

With this information, we find it interesting that Mirae Asset Securities is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Key Takeaway

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Mirae Asset Securities currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

You should always think about risks. Case in point, we've spotted 3 warning signs for Mirae Asset Securities you should be aware of, and 2 of them are concerning.

Of course, you might also be able to find a better stock than Mirae Asset 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.