Korea Cable T.V Chung-Buk System Co., Ltd. (KOSDAQ:066790) Shares Slammed 25% But Getting In Cheap Might Be Difficult Regardless

To the annoyance of some shareholders, Korea Cable T.V Chung-Buk System Co., Ltd. (KOSDAQ:066790) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 17% in that time.

In spite of the heavy fall in price, Korea Cable T.V Chung-Buk System's price-to-earnings (or "P/E") ratio of 45.1x might still make it look like a strong sell right now compared to the market in Korea, where around half of the companies have P/E ratios below 11x and even P/E's below 6x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Recent times have been quite advantageous for Korea Cable T.V Chung-Buk System as its earnings have been rising very briskly. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Korea Cable T.V Chung-Buk System

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Korea Cable T.V Chung-Buk System's earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The High P/E?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Korea Cable T.V Chung-Buk System's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 448%. The strong recent performance means it was also able to grow EPS by 428% in total over the last three years. Accordingly, shareholders would have probably welcomed those 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 understandable that Korea Cable T.V Chung-Buk System's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Key Takeaway

A significant share price dive has done very little to deflate Korea Cable T.V Chung-Buk System's very lofty P/E. 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.

As we suspected, our examination of Korea Cable T.V Chung-Buk System revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Korea Cable T.V Chung-Buk System (1 can't be ignored!) that you need to be mindful of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.