Lacklustre Performance Is Driving My E.G. Services Berhad's (KLSE:MYEG) Low P/E

With a price-to-earnings (or "P/E") ratio of 11.3x My E.G. Services Berhad (KLSE:MYEG) may be sending bullish signals at the moment, given that almost half of all companies in Malaysia have P/E ratios greater than 16x and even P/E's higher than 31x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's superior to most other companies of late, My E.G. Services Berhad has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, 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.

Check out our latest analysis for My E.G. Services Berhad

If you'd like to see what analysts are forecasting going forward, you should check out our free report on My E.G. Services Berhad.

Is There Any Growth For My E.G. Services Berhad?

My E.G. Services 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.

If we review the last year of earnings growth, the company posted a terrific increase of 33%. The latest three year period has also seen an excellent 92% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 4.7% per year during the coming three years according to the six analysts following the company. That's shaping up to be materially lower than the 14% per annum growth forecast for the broader market.

In light of this, it's understandable that My E.G. Services Berhad's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that My E.G. Services Berhad maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for My E.G. Services Berhad you should be aware of, and 1 of them is a bit concerning.

If you're unsure about the strength of My E.G. Services Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.