Wing Yip Food Holdings Group Limited's (KOSDAQ:900340) Price Is Right But Growth Is Lacking After Shares Rocket 30%

Wing Yip Food Holdings Group Limited (KOSDAQ:900340) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.9% over the last year.

Even after such a large jump in price, Wing Yip Food Holdings Group may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 2.9x, since almost half of all companies in Korea have P/E ratios greater than 15x and even P/E's higher than 30x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

For example, consider that Wing Yip Food Holdings Group's financial performance has been poor lately as its earnings have been in decline. It might be that many expect the disappointing earnings performance to continue or accelerate, 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 Wing Yip Food Holdings Group

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Wing Yip Food Holdings Group's earnings, revenue and cash flow.

How Is Wing Yip Food Holdings Group's Growth Trending?

In order to justify its P/E ratio, Wing Yip Food Holdings Group would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 2.3%. Still, the latest three year period has seen an excellent 69% overall rise in EPS, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 36% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Wing Yip Food Holdings Group's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

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

Shares in Wing Yip Food Holdings Group are going to need a lot more upward momentum to get the company's P/E out of its slump. 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 Wing Yip Food Holdings Group revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for Wing Yip Food Holdings Group that we have uncovered.

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.