Investors Continue Waiting On Sidelines For Icon Offshore Berhad (KLSE:ICON)

With a price-to-earnings (or "P/E") ratio of 13.1x Icon Offshore Berhad (KLSE:ICON) 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 26x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Icon Offshore Berhad hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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 Icon Offshore Berhad

Keen to find out how analysts think Icon Offshore Berhad's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Icon Offshore Berhad's Growth Trending?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 28%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should generate growth of 33% per annum as estimated by the sole analyst watching the company. With the market only predicted to deliver 16% each year, the company is positioned for a stronger earnings result.

With this information, we find it odd that Icon Offshore Berhad is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Icon Offshore Berhad's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Icon Offshore Berhad (of which 1 shouldn't be ignored!) 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.