Mah Sing Group Berhad's (KLSE:MAHSING) Shares Bounce 25% But Its Business Still Trails The Market

Mah Sing Group Berhad (KLSE:MAHSING) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 92%.

Although its price has surged higher, Mah Sing Group Berhad may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 12.9x, since almost half of all companies in Malaysia have P/E ratios greater than 17x and even P/E's higher than 30x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Mah Sing Group Berhad has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Mah Sing Group Berhad

Want the full picture on analyst estimates for the company? Then our free report on Mah Sing Group Berhad will help you uncover what's on the horizon.

How Is Mah Sing Group Berhad's Growth Trending?

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

Retrospectively, the last year delivered an exceptional 37% gain to the company's bottom line. The latest three year period has also seen an excellent 918% 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.

Shifting to the future, estimates from the eleven analysts covering the company suggest earnings should grow by 8.5% per annum over the next three years. That's shaping up to be materially lower than the 12% per annum growth forecast for the broader market.

In light of this, it's understandable that Mah Sing Group Berhad's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Mah Sing Group Berhad's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

As we suspected, our examination of Mah Sing Group Berhad's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Mah Sing Group Berhad that you should be aware of.

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.