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Namkwang Engineering & Construction Co., Ltd. (KRX:001260) Stock Rockets 35% As Investors Are Less Pessimistic Than Expected

Simply Wall St · 1d ago

Namkwang Engineering & Construction Co., Ltd. (KRX:001260) shares have had a really impressive month, gaining 35% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 35%.

After such a large jump in price, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 13x, you may consider Namkwang Engineering & Construction as a stock to avoid entirely with its 21.9x 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.

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For example, consider that Namkwang Engineering & Construction's financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

View our latest analysis for Namkwang Engineering & Construction

pe-multiple-vs-industry
KOSE:A001260 Price to Earnings Ratio vs Industry December 6th 2025
Although there are no analyst estimates available for Namkwang Engineering & Construction, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Growth For Namkwang Engineering & Construction?

The only time you'd be truly comfortable seeing a P/E as steep as Namkwang Engineering & Construction's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 59%. As a result, earnings from three years ago have also fallen 72% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 37% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we find it concerning that Namkwang Engineering & Construction is trading at a P/E higher than the market. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Namkwang Engineering & Construction's P/E

The strong share price surge has got Namkwang Engineering & Construction's P/E rushing to great heights as well. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Namkwang Engineering & Construction currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 3 warning signs for Namkwang Engineering & Construction that we have uncovered.

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