There Is A Reason ORION Corp.'s (KRX:271560) Price Is Undemanding

With a price-to-earnings (or "P/E") ratio of 9.3x ORION Corp. (KRX:271560) may be sending bullish signals at the moment, given that almost half of all companies in Korea have P/E ratios greater than 12x and even P/E's higher than 23x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

While the market has experienced earnings growth lately, ORION's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for ORION

Keen to find out how analysts think ORION's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For ORION?

ORION'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.

Retrospectively, the last year delivered a frustrating 3.5% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 62% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 6.7% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 19% per annum growth forecast for the broader market.

In light of this, it's understandable that ORION's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of ORION's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for ORION that you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.