Hyundai Glovis Co., Ltd. (KRX:086280) Shares Fly 37% But Investors Aren't Buying For Growth

Despite an already strong run, Hyundai Glovis Co., Ltd. (KRX:086280) shares have been powering on, with a gain of 37% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

Although its price has surged higher, Hyundai Glovis may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8.6x, since almost half of all companies in Korea have P/E ratios greater than 13x and even P/E's higher than 27x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Recent times haven't been advantageous for Hyundai Glovis as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

See our latest analysis for Hyundai Glovis

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How Is Hyundai Glovis' Growth Trending?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 8.0%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 88% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Looking ahead now, EPS is anticipated to climb by 10% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 20% each year growth forecast for the broader market.

In light of this, it's understandable that Hyundai Glovis' 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 Hyundai Glovis' P/E

Despite Hyundai Glovis' shares building up a head of steam, its P/E still lags most other companies. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Hyundai Glovis' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Hyundai Glovis.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.

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