Yahoo Finance Benign Growth For Evd Berhad (KLSE:EVD) Underpins Its Share Price
Evd Berhad's (KLSE:EVD) price-to-earnings (or "P/E") ratio of 10.5x might make it look like a buy right now compared to the market in Malaysia, where around half of the companies have P/E ratios above 16x and even P/E's above 28x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.
For instance, Evd Berhad's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.
See our latest analysis for Evd Berhad
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Evd Berhad will help you shine a light on its historical performance.
How Is Evd Berhad's Growth Trending?
There's an inherent assumption that a company should underperform the market for P/E ratios like Evd Berhad's to be considered reasonable.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 23%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 15% shows it's noticeably less attractive on an annualised basis.
In light of this, it's understandable that Evd Berhad's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.
What We Can Learn From Evd Berhad's P/E?
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.
We've established that Evd Berhad maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, 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 the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
You should always think about risks. Case in point, we've spotted 3 warning signs for Evd Berhad you should be aware of, and 1 of them is significant.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
