Mayu Global Group Berhad's (KLSE:MAYU) 26% Dip In Price Shows Sentiment Is Matching Earnings

Unfortunately for some shareholders, the Mayu Global Group Berhad (KLSE:MAYU) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 70% share price decline.

Although its price has dipped substantially, Mayu Global Group Berhad's price-to-earnings (or "P/E") ratio of 4.6x 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 14x and even P/E's above 25x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

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As an illustration, earnings have deteriorated at Mayu Global Group Berhad over the last year, which is not ideal at all. 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. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Check out 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.

Is There Any Growth For Mayu Global Group Berhad?

The only time you'd be truly comfortable seeing a P/E as depressed as Mayu Global Group Berhad's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered a frustrating 11% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 8.0% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 14% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we are not surprised that Mayu Global Group Berhad is trading at a P/E lower than the market. However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

Mayu Global Group Berhad's P/E looks about as weak as its stock price lately. 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 Mayu Global Group Berhad maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for Mayu Global Group Berhad (1 makes us a bit uncomfortable!) that you need to take into consideration.

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.