Steel Hawk Berhad (KLSE:HAWK) Could Be Riskier Than It Looks

Explore Steel Hawk Berhad's Fair Values from the Community and select yours

With a median price-to-earnings (or "P/E") ratio of close to 14x in Malaysia, you could be forgiven for feeling indifferent about Steel Hawk Berhad's (KLSE:HAWK) P/E ratio of 15.9x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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With earnings growth that's exceedingly strong of late, Steel Hawk Berhad has been doing very well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

View our latest analysis for Steel Hawk 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 Steel Hawk Berhad's earnings, revenue and cash flow.

Does Growth Match The P/E?

The only time you'd be comfortable seeing a P/E like Steel Hawk Berhad's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 94%. The latest three year period has also seen an excellent 330% overall rise in EPS, aided 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 13% 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 interesting that Steel Hawk Berhad is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Steel Hawk Berhad's P/E?

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 Steel Hawk Berhad currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

There are also other vital risk factors to consider and we've discovered 5 warning signs for Steel Hawk Berhad (2 can't be ignored!) that you should be aware of before investing here.

If you're unsure about the strength of Steel Hawk 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.