Investors Appear Satisfied With Sunview Group Berhad's (KLSE:SUNVIEW) Prospects As Shares Rocket 34%

Despite an already strong run, Sunview Group Berhad (KLSE:SUNVIEW) shares have been powering on, with a gain of 34% in the last thirty days. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Since its price has surged higher, Sunview Group Berhad may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 45.5x, since almost half of all companies in Malaysia have P/E ratios under 13x and even P/E's lower than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times haven't been advantageous for Sunview Group Berhad as its earnings have been rising slower than most other companies. It might be that many expect the uninspiring earnings performance to recover significantly, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Sunview Group Berhad

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

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Sunview Group Berhad's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a decent 7.2% gain to the company's bottom line. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 99% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 8.7% per year, which is noticeably less attractive.

In light of this, it's understandable that Sunview Group Berhad's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Sunview Group Berhad's P/E

Sunview Group Berhad's P/E is flying high just like its stock has during the last month. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Sunview Group Berhad's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 5 warning signs for Sunview Group Berhad (of which 2 are significant!) you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).

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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.