SKB Shutters Corporation Berhad (KLSE:SKBSHUT) Stock Rockets 25% But Many Are Still Ignoring The Company

Despite an already strong run, SKB Shutters Corporation Berhad (KLSE:SKBSHUT) shares have been powering on, with a gain of 25% in the last thirty days. The last month tops off a massive increase of 113% in the last year.

In spite of the firm bounce in price, SKB Shutters Corporation Berhad may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6.8x, since almost half of all companies in Malaysia have P/E ratios greater than 18x and even P/E's higher than 34x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

SKB Shutters Corporation Berhad has been doing a decent job lately as it's been growing earnings at a reasonable pace. One possibility is that the P/E is low because investors think this good earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

See our latest analysis for SKB Shutters Corporation Berhad

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on SKB Shutters Corporation Berhad's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, SKB Shutters Corporation Berhad would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a worthy increase of 5.2%. This was backed up an excellent period prior to see EPS up by 3,688% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 17% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that SKB Shutters Corporation Berhad's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From SKB Shutters Corporation Berhad's P/E?

Shares in SKB Shutters Corporation Berhad are going to need a lot more upward momentum to get the company's P/E out of its slump. 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 SKB Shutters Corporation Berhad currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings 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 if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Before you take the next step, you should know about the 1 warning sign for SKB Shutters Corporation Berhad that we have uncovered.

You might be able to find a better investment than SKB Shutters Corporation 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).

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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.