CJ Logistics Corporation's (KRX:000120) Earnings Are Not Doing Enough For Some Investors

When close to half the companies in Korea have price-to-earnings ratios (or "P/E's") above 12x, you may consider CJ Logistics Corporation (KRX:000120) as an attractive investment with its 8.8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

CJ Logistics certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for CJ Logistics

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

Does Growth Match The Low P/E?

There's an inherent assumption that a company should underperform the market for P/E ratios like CJ Logistics' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 31%. The strong recent performance means it was also able to grow EPS by 1,724% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 15% during the coming year according to the twelve analysts following the company. Meanwhile, the rest of the market is forecast to expand by 26%, which is noticeably more attractive.

In light of this, it's understandable that CJ Logistics' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On CJ Logistics' P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that CJ Logistics maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

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

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

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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.