It's Down 26% But Mayu Global Group Berhad (KLSE:MAYU) Could Be Riskier Than It Looks

Unfortunately for some shareholders, the Mayu Global Group Berhad (KLSE:MAYU) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.

Although its price has dipped substantially, Mayu Global Group Berhad may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.9x, since almost half of all companies in Malaysia have P/E ratios greater than 14x and even P/E's higher than 25x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Our free stock report includes 3 warning signs investors should be aware of before investing in Mayu Global Group Berhad. Read for free now.

Mayu Global Group Berhad certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Mayu Global Group Berhad

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

Does Growth Match The Low P/E?

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

Retrospectively, the last year delivered an exceptional 109% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 86% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 16% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Mayu Global Group 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 Final Word

Having almost fallen off a cliff, Mayu Global Group Berhad's share price has pulled its P/E way down as well. 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.

We've established that Mayu Global Group 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. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Mayu Global Group Berhad you should be aware of, and 1 of them is concerning.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.