Kiwoom Securities Co., Ltd.'s (KRX:039490) Share Price Boosted 26% But Its Business Prospects Need A Lift Too

Kiwoom Securities Co., Ltd. (KRX:039490) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 3.8% isn't as attractive.

In spite of the firm bounce in price, Kiwoom Securities' price-to-earnings (or "P/E") ratio of 4.4x might still make it look like a strong buy right now compared to the market in Korea, where around half of the companies have P/E ratios above 12x and even P/E's above 26x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Our free stock report includes 2 warning signs investors should be aware of before investing in Kiwoom Securities. Read for free now.

With earnings growth that's superior to most other companies of late, Kiwoom Securities has been doing relatively well. 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.

See our latest analysis for Kiwoom Securities

Want the full picture on analyst estimates for the company? Then our free report on Kiwoom Securities will help you uncover what's on the horizon.

Is There Any Growth For Kiwoom Securities?

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

Retrospectively, the last year delivered an exceptional 91% gain to the company's bottom line. Still, incredibly EPS has fallen 6.1% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 7.4% per year over the next three years. That's shaping up to be materially lower than the 18% per year growth forecast for the broader market.

With this information, we can see why Kiwoom Securities 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.

What We Can Learn From Kiwoom Securities' P/E?

Shares in Kiwoom Securities are going to need a lot more upward momentum to get the company's P/E out of its slump. 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 Kiwoom Securities' 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Kiwoom Securities has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.