Focus Dynamics Group Berhad (KLSE:FOCUS) Not Doing Enough For Some Investors As Its Shares Slump 30%

Unfortunately for some shareholders, the Focus Dynamics Group Berhad (KLSE:FOCUS) share price has dived 30% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 95% loss during that time.

Following the heavy fall in price, Focus Dynamics Group Berhad may be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9.3x, since 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. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Focus Dynamics Group Berhad certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. 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.

View our latest analysis for Focus Dynamics Group 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 Focus Dynamics Group Berhad's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Focus Dynamics Group Berhad would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 458% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 18% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Focus Dynamics Group Berhad's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Key Takeaway

The softening of Focus Dynamics Group Berhad's shares means its P/E is now sitting at a pretty low level. 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.

As we suspected, our examination of Focus Dynamics Group Berhad revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 4 warning signs for Focus Dynamics Group Berhad you should be aware of, and 1 of them makes us a bit uncomfortable.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's 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.