MCE Holdings Berhad's (KLSE:MCEHLDG) Shares Leap 30% Yet They're Still Not Telling The Full Story

MCE Holdings Berhad (KLSE:MCEHLDG) shareholders have had their patience rewarded with a 30% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 76% in the last year.

In spite of the firm bounce in price, given about half the companies in Malaysia have price-to-earnings ratios (or "P/E's") above 16x, you may still consider MCE Holdings Berhad as an attractive investment with its 10x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, MCE Holdings Berhad has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for MCE Holdings Berhad

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MCE Holdings Berhad.

Is There Any Growth For MCE Holdings Berhad?

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

Retrospectively, the last year delivered an exceptional 80% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 22% as estimated by the sole analyst watching the company. With the market only predicted to deliver 15%, the company is positioned for a stronger earnings result.

With this information, we find it odd that MCE Holdings Berhad is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

MCE Holdings Berhad's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 MCE Holdings Berhad's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for MCE Holdings Berhad you should know about.

If you're unsure about the strength of MCE Holdings Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.