Not Many Are Piling Into Home Center Holdings Co.,Ltd (KOSDAQ:060560) Stock Yet As It Plummets 27%

Home Center Holdings Co.,Ltd (KOSDAQ:060560) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 31% in that time.

Even after such a large drop in price, given about half the companies in Korea have price-to-earnings ratios (or "P/E's") above 12x, you may still consider Home Center HoldingsLtd as a highly attractive investment with its 5.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

For instance, Home Center HoldingsLtd's receding earnings in recent times would have to be some food for thought. 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.

See our latest analysis for Home Center HoldingsLtd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Home Center HoldingsLtd will help you shine a light on its historical performance.

Is There Any Growth For Home Center HoldingsLtd?

The only time you'd be truly comfortable seeing a P/E as depressed as Home Center HoldingsLtd's is when the company's growth is on track to lag the market decidedly.

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 22%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 250% 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.

This is in contrast to the rest of the market, which is expected to grow by 31% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Home Center HoldingsLtd's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Home Center HoldingsLtd's P/E

Shares in Home Center HoldingsLtd have plummeted and its P/E is now low enough to touch the ground. 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 Home Center HoldingsLtd currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 3 warning signs for Home Center HoldingsLtd you should be aware of.

If these risks are making you reconsider your opinion on Home Center HoldingsLtd, 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.