T'Way Air Co., Ltd. (KRX:091810) May Have Run Too Fast Too Soon With Recent 27% Price Plummet

T'Way Air Co., Ltd. (KRX:091810) shares have had a horrible month, losing 27% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 11% share price drop.

In spite of the heavy fall in price, it's still not a stretch to say that T'Way Air's price-to-earnings (or "P/E") ratio of 11.1x right now seems quite "middle-of-the-road" compared to the market in Korea, where the median P/E ratio is around 12x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

T'Way Air could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for T'Way Air

If you'd like to see what analysts are forecasting going forward, you should check out our free report on T'Way Air.

How Is T'Way Air's Growth Trending?

In order to justify its P/E ratio, T'Way Air would need to produce growth that's similar to the market.

Retrospectively, the last year delivered a frustrating 54% decrease to the company's bottom line. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 21% during the coming year according to the five analysts following the company. With the market predicted to deliver 26% growth , the company is positioned for a weaker earnings result.

With this information, we find it interesting that T'Way Air is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Final Word

With its share price falling into a hole, the P/E for T'Way Air looks quite average now. 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.

Our examination of T'Way Air's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about these 2 warning signs we've spotted with T'Way Air.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.