Earnings Not Telling The Story For P.I.E. Industrial Berhad (KLSE:PIE) After Shares Rise 46%

The P.I.E. Industrial Berhad (KLSE:PIE) share price has done very well over the last month, posting an excellent gain of 46%. The last 30 days bring the annual gain to a very sharp 35%.

Since its price has surged higher, P.I.E. Industrial Berhad may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 25.7x, since almost half of all companies in Malaysia have P/E ratios under 16x and even P/E's lower than 10x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent earnings growth for P.I.E. Industrial Berhad has been in line with the market. One possibility is that the P/E is high because investors think this modest earnings performance will accelerate. If not, then existing shareholders may be a little nervous about the viability of the share price.

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How Is P.I.E. Industrial Berhad's Growth Trending?

P.I.E. Industrial Berhad's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.3% last year. This was backed up an excellent period prior to see EPS up by 62% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 16% during the coming year according to the dual analysts following the company. That's shaping up to be similar to the 17% growth forecast for the broader market.

With this information, we find it interesting that P.I.E. Industrial Berhad is trading at a high P/E compared to the market. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/E falls to levels more in line with the growth outlook.

The Key Takeaway

P.I.E. Industrial Berhad's P/E is flying high just like its stock has during the last month. 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.

We've established that P.I.E. Industrial Berhad currently trades on a higher than expected P/E since its forecast growth is only in line with the wider market. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 1 warning sign for P.I.E. Industrial Berhad that we have uncovered.

If these risks are making you reconsider your opinion on P.I.E. Industrial Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.