Wing Yip Food Holdings Group Limited's (KOSDAQ:900340) 26% Dip In Price Shows Sentiment Is Matching Earnings

Wing Yip Food Holdings Group Limited (KOSDAQ:900340) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 94%, which is great even in a bull market.

Even after such a large drop in price, Wing Yip Food Holdings Group's price-to-earnings (or "P/E") ratio of 4.3x 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 13x 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.

Recent times have been quite advantageous for Wing Yip Food Holdings Group as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Wing Yip Food Holdings Group

Although there are no analyst estimates available for Wing Yip Food Holdings Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Wing Yip Food Holdings Group?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Wing Yip Food Holdings Group's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 48% gain to the company's bottom line. As a result, it also grew EPS by 30% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 33% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why Wing Yip Food Holdings Group is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On Wing Yip Food Holdings Group's P/E

Having almost fallen off a cliff, Wing Yip Food Holdings Group's share price has pulled its P/E way down as well. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Wing Yip Food Holdings Group maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term 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 - Wing Yip Food Holdings Group has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If these risks are making you reconsider your opinion on Wing Yip Food Holdings Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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