Insufficient Growth At Samsung Securities Co.,Ltd. (KRX:016360) Hampers Share Price

With a price-to-earnings (or "P/E") ratio of 6x Samsung Securities Co.,Ltd. (KRX:016360) may be sending very bullish signals at the moment, given that almost half of all companies in Korea have P/E ratios greater than 13x and even P/E's higher than 28x 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.

Samsung SecuritiesLtd 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. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, 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 Samsung SecuritiesLtd

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

How Is Samsung SecuritiesLtd's Growth Trending?

In order to justify its P/E ratio, Samsung SecuritiesLtd would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a decent 4.7% gain to the company's bottom line. Still, lamentably EPS has fallen 30% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 11% per year as estimated by the eleven analysts watching the company. That's shaping up to be materially lower than the 20% per annum growth forecast for the broader market.

With this information, we can see why Samsung SecuritiesLtd 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

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 Samsung SecuritiesLtd'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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Samsung SecuritiesLtd you should know about.

Of course, you might also be able to find a better stock than Samsung SecuritiesLtd. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com