What You Can Learn From YC Corporation's (KOSDAQ:232140) P/E After Its 27% Share Price Crash

To the annoyance of some shareholders, YC Corporation (KOSDAQ:232140) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 189% in the last twelve months.

Even after such a large drop in price, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 11x, you may still consider YC as a stock to avoid entirely with its 65.4x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

YC hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour 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 YC

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

Is There Enough Growth For YC?

In order to justify its P/E ratio, YC would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 7.0% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 60% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 71% per year as estimated by the lone analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 17% each year, which is noticeably less attractive.

In light of this, it's understandable that YC's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From YC's P/E?

YC's shares may have retreated, but its P/E is still flying high. 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.

We've established that YC 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for YC that we have uncovered.

You might be able to find a better investment than YC. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.