Insufficient Growth At Yinson Holdings Berhad (KLSE:YINSON) Hampers Share Price

With a price-to-earnings (or "P/E") ratio of 9.9x Yinson Holdings Berhad (KLSE:YINSON) 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 30x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been advantageous for Yinson Holdings Berhad as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Yinson Holdings Berhad

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Yinson Holdings Berhad.

What Are Growth Metrics Telling Us About The Low P/E?

Yinson Holdings 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.

Taking a look back first, we see that the company grew earnings per share by an impressive 50% last year. Pleasingly, EPS has also lifted 56% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 7.4% per year over the next three years. Meanwhile, the rest of the market is forecast to expand by 14% per year, which is noticeably more attractive.

In light of this, it's understandable that Yinson Holdings 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.

What We Can Learn From Yinson Holdings Berhad's P/E?

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.

As we suspected, our examination of Yinson Holdings Berhad's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 3 warning signs for Yinson Holdings Berhad (2 are a bit concerning!) that you need to take into consideration.

Of course, you might also be able to find a better stock than Yinson Holdings Berhad. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.