KSL Holdings Berhad (KLSE:KSL) Stock Catapults 31% Though Its Price And Business Still Lag The Market

Despite an already strong run, KSL Holdings Berhad (KLSE:KSL) shares have been powering on, with a gain of 31% in the last thirty days. The annual gain comes to 129% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, KSL Holdings 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 17x and even P/E's above 30x 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.

KSL 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 that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for KSL Holdings Berhad

Although there are no analyst estimates available for KSL Holdings Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is KSL Holdings Berhad's Growth Trending?

KSL 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.

If we review the last year of earnings growth, the company posted a terrific increase of 131%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 17% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that KSL Holdings Berhad's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

Shares in KSL Holdings Berhad are going to need a lot more upward momentum to get the company's P/E out of its slump. 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 KSL Holdings Berhad revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with KSL Holdings Berhad.

If you're unsure about the strength of KSL 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.