P&H Tech Co., Ltd.'s (KOSDAQ:239890) 26% Cheaper Price Remains In Tune With Earnings

To the annoyance of some shareholders, P&H Tech Co., Ltd. (KOSDAQ:239890) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 70% share price decline.

Although its price has dipped substantially, P&H Tech may still be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.8x, since almost half of all companies in Korea have P/E ratios under 10x and even P/E's lower than 6x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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While the market has experienced earnings growth lately, P&H Tech's earnings have gone into reverse gear, which is not great. 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 P&H Tech

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How Is P&H Tech's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 44% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 16% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 165% during the coming year according to the only analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 22%, which is noticeably less attractive.

In light of this, it's understandable that P&H Tech'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 P&H Tech's P/E?

There's still some solid strength behind P&H Tech's P/E, if not its share price lately. 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 P&H Tech 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 settle on your opinion, we've discovered 2 warning signs for P&H Tech that 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.

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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.