Why Investors Shouldn't Be Surprised By JUSUNG ENGINEERING Co.,Ltd.'s (KOSDAQ:036930) P/E

JUSUNG ENGINEERING Co.,Ltd.'s (KOSDAQ:036930) price-to-earnings (or "P/E") ratio of 41.1x might 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 12x 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.

JUSUNG ENGINEERINGLtd has been struggling lately as its earnings have declined faster than most other companies. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for JUSUNG ENGINEERINGLtd

Want the full picture on analyst estimates for the company? Then our free report on JUSUNG ENGINEERINGLtd will help you uncover what's on the horizon.

Is There Enough Growth For JUSUNG ENGINEERINGLtd?

JUSUNG ENGINEERINGLtd's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

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 56%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 339% 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.

Looking ahead now, EPS is anticipated to climb by 49% per annum during the coming three years according to the six analysts following the company. That's shaping up to be materially higher than the 20% per year growth forecast for the broader market.

With this information, we can see why JUSUNG ENGINEERINGLtd is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On JUSUNG ENGINEERINGLtd's P/E

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 JUSUNG ENGINEERINGLtd maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for JUSUNG ENGINEERINGLtd you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.