Duk San Neolux Co.,Ltd's (KOSDAQ:213420) Popularity With Investors Under Threat As Stock Sinks 25%

Duk San Neolux Co.,Ltd (KOSDAQ:213420) shareholders that were waiting for something to happen have been dealt a blow with a 25% 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 37% in that time.

Although its price has dipped substantially, given around half the companies in Korea have price-to-earnings ratios (or "P/E's") below 10x, you may still consider Duk San NeoluxLtd as a stock to potentially avoid with its 13x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Recent times have been advantageous for Duk San NeoluxLtd as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Duk San NeoluxLtd

Keen to find out how analysts think Duk San NeoluxLtd's future stacks up against the industry? In that case, our free report is a great place to start .

How Is Duk San NeoluxLtd's Growth Trending?

Duk San NeoluxLtd's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 28% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 4.3% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 23% as estimated by the seven analysts watching the company. With the market predicted to deliver 22% growth , the company is positioned for a comparable earnings result.

With this information, we find it interesting that Duk San NeoluxLtd is trading at a high P/E compared to the market. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/E falls to levels more in line with the growth outlook.

The Final Word

Duk San NeoluxLtd's P/E hasn't come down all the way after its stock plunged. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Duk San NeoluxLtd's analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Duk San NeoluxLtd with six simple checks.

Of course, you might also be able to find a better stock than Duk San NeoluxLtd. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.