A Piece Of The Puzzle Missing From Worldex Industry & Trading Co., Ltd.'s (KOSDAQ:101160) Share Price

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") above 13x, you may consider Worldex Industry & Trading Co., Ltd. (KOSDAQ:101160) as a highly attractive investment with its 4.9x 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.

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The earnings growth achieved at Worldex Industry & Trading over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Worldex Industry & Trading

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

Does Growth Match The Low P/E?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Worldex Industry & Trading's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 21% last year. The latest three year period has also seen an excellent 94% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 19% shows it's noticeably more attractive on an annualised basis.

With this information, we find it odd that Worldex Industry & Trading is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Worldex Industry & Trading revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. 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.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Worldex Industry & Trading with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Worldex Industry & Trading's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.