Stock Analysis

AT Systematization Berhad (KLSE:AT) Looks Inexpensive After Falling 50% But Perhaps Not Attractive Enough

KLSE:AT
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AT Systematization Berhad (KLSE:AT) shareholders that were waiting for something to happen have been dealt a blow with a 50% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 75% loss during that time.

Following the heavy fall in price, AT Systematization Berhad may be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of -0.4x, since almost half of all companies in Malaysia have P/E ratios greater than 14x and even P/E's higher than 26x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

AT Systematization Berhad certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for AT Systematization Berhad

pe-multiple-vs-industry
KLSE:AT Price to Earnings Ratio vs Industry June 8th 2023
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on AT Systematization Berhad will help you shine a light on its historical performance.

What Are Growth Metrics Telling Us About The Low P/E?

AT Systematization Berhad's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 47% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 11% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that AT Systematization 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 AT Systematization Berhad's P/E?

Having almost fallen off a cliff, AT Systematization Berhad's share price has pulled its P/E way down 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 AT Systematization Berhad maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 4 warning signs for AT Systematization Berhad (3 are potentially serious!) that you should be aware of before investing here.

You might be able to find a better investment than AT Systematization Berhad. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Valuation is complex, but we're helping make it simple.

Find out whether AT Systematization Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.