The Market Lifts PT Resources Holdings Berhad (KLSE:PTRB) Shares 25% But It Can Do More
PT Resources Holdings Berhad (KLSE:PTRB) shareholders have had their patience rewarded with a 25% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 46% in the last year.
Although its price has surged higher, Resources Holdings Berhad's price-to-earnings (or "P/E") ratio of 5.8x might still make it look like a strong buy right now compared to the market in Malaysia, where around half of the companies have P/E ratios above 18x and even P/E's above 34x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.
Resources Holdings Berhad certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.
View our latest analysis for Resources Holdings Berhad
How Is Resources Holdings Berhad's Growth Trending?
Resources Holdings Berhad's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 115% last year. Pleasingly, EPS has also lifted 165% 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.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 17% shows it's noticeably more attractive on an annualised basis.
With this information, we find it odd that Resources Holdings Berhad is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.
The Bottom Line On Resources Holdings Berhad's P/E
Even after such a strong price move, Resources Holdings Berhad's P/E still trails the rest of the market significantly. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that Resources Holdings Berhad currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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.
Before you settle on your opinion, we've discovered 3 warning signs for Resources Holdings Berhad (1 is concerning!) that you should be aware of.
If you're unsure about the strength of Resources Holdings 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About KLSE:PTRB
Resources Holdings Berhad
An investment holding company, primarily engages in the processing and trading of frozen seafood products, and retail trading of meat and non-meat products in Malaysia, the Philippines, Saudi Arabia, China, Indonesia, Thailand, Singapore, and the United Arab Emirates.
Flawless balance sheet with solid track record.
