The Market Lifts Rapid Synergy Berhad (KLSE:RAPID) Shares 37% But It Can Do More

Rapid Synergy Berhad (KLSE:RAPID) shares have had a really impressive month, gaining 37% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 7.7% isn't as attractive.

Although its price has surged higher, given about half the companies in Malaysia have price-to-earnings ratios (or "P/E's") above 15x, you may still consider Rapid Synergy Berhad as a highly attractive investment with its 6.6x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

We've discovered 4 warning signs about Rapid Synergy Berhad. View them for free.

Recent times have been quite advantageous for Rapid Synergy Berhad as its earnings have been rising very briskly. 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.

View our latest analysis for Rapid Synergy Berhad

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Rapid Synergy 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 Rapid Synergy Berhad's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 201% gain to the company's bottom line. The latest three year period has also seen an excellent 258% 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.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 16% shows it's noticeably more attractive on an annualised basis.

With this information, we find it odd that Rapid Synergy Berhad is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Rapid Synergy Berhad's P/E

Shares in Rapid Synergy 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.

We've established that Rapid Synergy Berhad currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. 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.

Having said that, be aware Rapid Synergy Berhad is showing 4 warning signs in our investment analysis, you should know about.

Of course, you might also be able to find a better stock than Rapid Synergy Berhad. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.