Market Cool On Negri Sembilan Oil Palms Berhad's (KLSE:NSOP) Earnings

There wouldn't be many who think Negri Sembilan Oil Palms Berhad's (KLSE:NSOP) price-to-earnings (or "P/E") ratio of 15.6x is worth a mention when the median P/E in Malaysia is similar at about 16x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been quite advantageous for Negri Sembilan Oil Palms Berhad as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Negri Sembilan Oil Palms Berhad

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Negri Sembilan Oil Palms Berhad will help you shine a light on its historical performance.

Does Growth Match The P/E?

Negri Sembilan Oil Palms Berhad's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings growth, the company posted a terrific increase of 449%. The latest three year period has also seen an excellent 1,310% 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.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 18% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that Negri Sembilan Oil Palms 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 Negri Sembilan Oil Palms Berhad's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Negri Sembilan Oil Palms Berhad currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. 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.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Negri Sembilan Oil Palms Berhad (1 is a bit concerning!) that you need to be mindful of.

If you're unsure about the strength of Negri Sembilan Oil Palms 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.