Manyo Factory Co., Ltd's (KOSDAQ:439090) 30% Cheaper Price Remains In Tune With Earnings

Manyo Factory Co., Ltd (KOSDAQ:439090) shares have had a horrible month, losing 30% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 26% in that time.

Although its price has dipped substantially, given around half the companies in Korea have price-to-earnings ratios (or "P/E's") below 10x, you may still consider Manyo Factory as a stock to potentially avoid with its 15.1x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Manyo Factory has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Manyo Factory

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

Is There Enough Growth For Manyo Factory?

There's an inherent assumption that a company should outperform the market for P/E ratios like Manyo Factory's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 99%. However, this wasn't enough as the latest three year period has seen a very unpleasant 97% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 105% during the coming year according to the lone analyst following the company. That's shaping up to be materially higher than the 34% growth forecast for the broader market.

With this information, we can see why Manyo Factory is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Despite the recent share price weakness, Manyo Factory's P/E remains higher than most other companies. 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 Manyo Factory maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Manyo Factory with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Manyo Factory, 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.