Stock Analysis

Investors Still Aren't Entirely Convinced By Keck Seng (Malaysia) Berhad's (KLSE:KSENG) Earnings Despite 26% Price Jump

Source: Shutterstock

The Keck Seng (Malaysia) Berhad (KLSE:KSENG) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 65% in the last year.

Although its price has surged higher, given about half the companies in Malaysia have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Keck Seng (Malaysia) Berhad as an attractive investment with its 11.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

For example, consider that Keck Seng (Malaysia) Berhad's financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. 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.

See our latest analysis for Keck Seng (Malaysia) Berhad

KLSE:KSENG Price to Earnings Ratio vs Industry January 26th 2024
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 Keck Seng (Malaysia) Berhad's earnings, revenue and cash flow.

How Is Keck Seng (Malaysia) Berhad's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Keck Seng (Malaysia) Berhad's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 8.6% decrease to the company's bottom line. Even so, admirably EPS has lifted 6,586% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 15% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Keck Seng (Malaysia) Berhad's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

Despite Keck Seng (Malaysia) Berhad's shares building up a head of steam, its P/E still lags most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Keck Seng (Malaysia) Berhad revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Keck Seng (Malaysia) Berhad you should be aware of.

If these risks are making you reconsider your opinion on Keck Seng (Malaysia) Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.

Valuation is complex, but we're helping make it simple.

Find out whether Keck Seng (Malaysia) Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at)

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.