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Not Many Are Piling Into Amkor Technology, Inc. (NASDAQ:AMKR) Stock Yet As It Plummets 26%
Unfortunately for some shareholders, the Amkor Technology, Inc. (NASDAQ:AMKR) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 51% share price decline.
After such a large drop in price, Amkor Technology's price-to-earnings (or "P/E") ratio of 10.7x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 16x and even P/E's above 30x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
While the market has experienced earnings growth lately, Amkor Technology's earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
See our latest analysis for Amkor Technology
How Is Amkor Technology's Growth Trending?
In order to justify its P/E ratio, Amkor Technology would need to produce sluggish growth that's trailing the market.
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 1.9%. The last three years don't look nice either as the company has shrunk EPS by 46% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 11% each year as estimated by the nine analysts watching the company. With the market predicted to deliver 11% growth per annum, the company is positioned for a comparable earnings result.
With this information, we find it odd that Amkor Technology is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.
The Bottom Line On Amkor Technology's P/E
The softening of Amkor Technology's shares means its P/E is now sitting at a pretty low level. 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 Amkor Technology's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.
And what about other risks? Every company has them, and we've spotted 1 warning sign for Amkor Technology you should know about.
Of course, you might also be able to find a better stock than Amkor Technology. 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.