The Market Doesn't Like What It Sees From Yinson Holdings Berhad's (KLSE:YINSON) Earnings Yet

When close to half the companies in Malaysia have price-to-earnings ratios (or "P/E's") above 16x, you may consider Yinson Holdings Berhad (KLSE:YINSON) as an attractive investment with its 10.4x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Yinson Holdings Berhad has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

How Is Yinson Holdings Berhad's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Yinson Holdings Berhad's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 67% last year. The strong recent performance means it was also able to grow EPS by 67% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 8.3% as estimated by the eight analysts watching the company. That's shaping up to be materially lower than the 15% growth forecast for the broader market.

With this information, we can see why Yinson Holdings Berhad is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Yinson Holdings Berhad's P/E

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.

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. It's hard to see the share price rising strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Yinson Holdings Berhad, and understanding should be part of your investment process.

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 low P/E).

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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.