Samaiden Group Berhad (KLSE:SAMAIDEN) Not Flying Under The Radar

When close to half the companies in Malaysia have price-to-earnings ratios (or "P/E's") below 17x, you may consider Samaiden Group Berhad (KLSE:SAMAIDEN) as a stock to avoid entirely with its 36.6x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Samaiden Group Berhad has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Samaiden Group Berhad

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

Samaiden Group 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.

If we review the last year of earnings growth, the company posted a terrific increase of 27%. The strong recent performance means it was also able to grow EPS by 87% 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 61% during the coming year according to the five analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 18%, which is noticeably less attractive.

With this information, we can see why Samaiden Group Berhad is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Samaiden Group Berhad's P/E?

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Samaiden Group Berhad maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Samaiden Group Berhad, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Samaiden Group 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.