SAMPYO Cement Co., Ltd. (KOSDAQ:038500) Soars 34% But It's A Story Of Risk Vs Reward

SAMPYO Cement Co., Ltd. (KOSDAQ:038500) shares have had a really impressive month, gaining 34% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 38% in the last year.

In spite of the firm bounce in price, SAMPYO Cement may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11.1x, since almost half of all companies in Korea have P/E ratios greater than 14x and even P/E's higher than 30x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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While the market has experienced earnings growth lately, SAMPYO Cement'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 you still 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.

See our latest analysis for SAMPYO Cement

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

How Is SAMPYO Cement's Growth Trending?

SAMPYO Cement'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 21% 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 35% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 74% as estimated by the lone analyst watching the company. With the market only predicted to deliver 39%, the company is positioned for a stronger earnings result.

With this information, we find it odd that SAMPYO Cement is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

SAMPYO Cement's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that SAMPYO Cement currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Before you settle on your opinion, we've discovered 1 warning sign for SAMPYO Cement that you should be aware of.

Of course, you might also be able to find a better stock than SAMPYO Cement. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.