Investors Don't See Light At End Of Samsung Fire & Marine Insurance Co., Ltd.'s (KRX:000810) Tunnel

Samsung Fire & Marine Insurance Co., Ltd.'s (KRX:000810) price-to-earnings (or "P/E") ratio of 7.8x might make it look like a 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 reduced P/E.

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Samsung Fire & Marine Insurance certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 Samsung Fire & Marine Insurance

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

Is There Any Growth For Samsung Fire & Marine Insurance?

The only time you'd be truly comfortable seeing a P/E as low as Samsung Fire & Marine Insurance's is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a worthy increase of 14%. The latest three year period has also seen an excellent 87% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 6.3% per year during the coming three years according to the nine analysts following the company. That's shaping up to be materially lower than the 17% each year growth forecast for the broader market.

With this information, we can see why Samsung Fire & Marine Insurance is trading at a P/E lower than the market. 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

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Samsung Fire & Marine Insurance'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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with Samsung Fire & Marine Insurance.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.