SkyWorld Development Berhad (KLSE:SKYWLD) Doing What It Can To Lift Shares

When close to half the companies in Malaysia have price-to-earnings ratios (or "P/E's") above 17x, you may consider SkyWorld Development Berhad (KLSE:SKYWLD) as a highly attractive investment with its 4.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

SkyWorld Development Berhad has been doing a good job lately as it's been growing earnings at a solid pace. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for SkyWorld Development Berhad

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on SkyWorld Development Berhad will help you shine a light on its historical performance.

Is There Any Growth For SkyWorld Development Berhad?

SkyWorld Development 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.

Taking a look back first, we see that the company grew earnings per share by an impressive 24% last year. The strong recent performance means it was also able to grow EPS by 86% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 17% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that SkyWorld Development Berhad is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On SkyWorld Development Berhad's P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of SkyWorld Development Berhad revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. 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.

You should always think about risks. Case in point, we've spotted 2 warning signs for SkyWorld Development Berhad you should be aware of, and 1 of them can't be ignored.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.