Cautious Investors Not Rewarding Tuju Setia Berhad's (KLSE:TJSETIA) Performance Completely

Tuju Setia Berhad's (KLSE:TJSETIA) price-to-earnings (or "P/E") ratio of 10.9x might make it look like a buy right now compared to the market in Malaysia, where around half of the companies have P/E ratios above 17x and even P/E's above 31x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

The recent earnings growth at Tuju Setia Berhad would have to be considered satisfactory if not spectacular. It might be that many expect the respectable earnings performance to degrade, which has repressed the P/E. 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 Tuju Setia Berhad

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tuju Setia Berhad will help you shine a light on its historical performance.

Is There Any Growth For Tuju Setia Berhad?

Tuju Setia Berhad's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a decent 4.6% gain to the company's bottom line. The latest three year period has also seen an excellent 123% overall rise in EPS, aided somewhat by its short-term performance. 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 14% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Tuju Setia Berhad is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

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.

Our examination of Tuju Setia Berhad revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. 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. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Tuju Setia Berhad (1 is a bit concerning) you should be aware of.

You might be able to find a better investment than Tuju Setia Berhad. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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.

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