Shareholders Should Be Pleased With Eco World Development Group Berhad's (KLSE:ECOWLD) Price

With a price-to-earnings (or "P/E") ratio of 16.4x Eco World Development Group Berhad (KLSE:ECOWLD) may be sending bearish signals at the moment, given that almost half of all companies in Malaysia have P/E ratios under 13x and even P/E's lower than 8x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Eco World Development Group Berhad certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Eco World Development Group Berhad

Keen to find out how analysts think Eco World Development Group Berhad's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Eco World Development Group Berhad's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Eco World Development Group Berhad's is when the company's growth is on track to outshine the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 55% last year. The latest three year period has also seen an excellent 70% 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.

Looking ahead now, EPS is anticipated to climb by 15% per annum during the coming three years according to the ten analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 9.6% each year, which is noticeably less attractive.

With this information, we can see why Eco World Development Group Berhad is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Eco World Development Group Berhad's P/E

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.

As we suspected, our examination of Eco World Development Group Berhad's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Eco World Development Group Berhad that you should be aware of.

If you're unsure about the strength of Eco World Development Group 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.