Samsung Securities Co.,Ltd. (KRX:016360) Stock Catapults 35% Though Its Price And Business Still Lag The Market

Samsung Securities Co.,Ltd. (KRX:016360) shares have continued their recent momentum with a 35% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 98% in the last year.

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 Samsung SecuritiesLtd as an attractive investment with its 7.6x 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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Samsung SecuritiesLtd 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 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 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.

Does Growth Match The Low P/E?

Samsung SecuritiesLtd's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 63%. EPS has also lifted 8.0% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 2.2% per annum as estimated by the twelve analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 18% each year, which is noticeably more attractive.

With this information, we can see why Samsung SecuritiesLtd is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Despite Samsung SecuritiesLtd's shares building up a head of steam, its P/E still lags most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Samsung SecuritiesLtd's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with Samsung SecuritiesLtd (including 1 which can't be ignored).

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.