Kiwoom Securities Co., Ltd. (KRX:039490) Doing What It Can To Lift Shares

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") above 12x, you may consider Kiwoom Securities Co., Ltd. (KRX:039490) as an attractive investment with its 9.5x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

While the market has experienced earnings growth lately, Kiwoom Securities' earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

See our latest analysis for Kiwoom Securities

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

Does Growth Match The Low P/E?

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

Retrospectively, the last year delivered a frustrating 41% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 62% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 34% per annum over the next three years. That's shaping up to be materially higher than the 20% per year growth forecast for the broader market.

In light of this, it's peculiar that Kiwoom Securities' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

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.

We've established that Kiwoom Securities currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

You need to take note of risks, for example - Kiwoom Securities has 3 warning signs (and 1 which can't be ignored) we think you should know about.

If you're unsure about the strength of Kiwoom Securities' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.