S&D Co., Ltd's (KOSDAQ:260970) 28% Cheaper Price Remains In Tune With Earnings

S&D Co., Ltd (KOSDAQ:260970) shares have had a horrible month, losing 28% after a relatively good period beforehand. The good news is that in the last year, the stock has shone bright like a diamond, gaining 161%.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about S&D's P/E ratio of 13.8x, since the median price-to-earnings (or "P/E") ratio in Korea is also close to 15x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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With its earnings growth in positive territory compared to the declining earnings of most other companies, S&D has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. 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 not quite in favour.

View our latest analysis for S&D

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

Is There Some Growth For S&D?

The only time you'd be comfortable seeing a P/E like S&D's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 67%. Pleasingly, EPS has also lifted 184% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 21% per year as estimated by the dual analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 20% each year, which is not materially different.

In light of this, it's understandable that S&D's P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On S&D's P/E

S&D's plummeting stock price has brought its P/E right back to the rest of the market. 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 S&D's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for S&D you should be aware of, and 1 of them is concerning.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.