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Investors Don't See Light At End Of Bermaz Auto Berhad's (KLSE:BAUTO) Tunnel And Push Stock Down 27%
Unfortunately for some shareholders, the Bermaz Auto Berhad (KLSE:BAUTO) share price has dived 27% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 41% share price drop.
Although its price has dipped substantially, given about half the companies in Malaysia have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Bermaz Auto Berhad as a highly attractive investment with its 6.2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
Bermaz Auto Berhad could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
See our latest analysis for Bermaz Auto Berhad
Keen to find out how analysts think Bermaz Auto Berhad's future stacks up against the industry? In that case, our free report is a great place to start.Does Growth Match The Low P/E?
The only time you'd be truly comfortable seeing a P/E as depressed as Bermaz Auto Berhad's is when the company's growth is on track to lag the market decidedly.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 30%. Even so, admirably EPS has lifted 94% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.
Looking ahead now, EPS is anticipated to climb by 2.1% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 16% each year growth forecast for the broader market.
In light of this, it's understandable that Bermaz Auto Berhad's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Key Takeaway
Having almost fallen off a cliff, Bermaz Auto Berhad's share price has pulled its P/E way down as well. 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 Bermaz Auto 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. It's hard to see the share price rising strongly in the near future under these circumstances.
Before you take the next step, you should know about the 2 warning signs for Bermaz Auto Berhad (1 makes us a bit uncomfortable!) that we have uncovered.
You might be able to find a better investment than Bermaz Auto Berhad. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
Valuation is complex, but we're here to simplify it.
Discover if Bermaz Auto Berhad might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About KLSE:BAUTO
Bermaz Auto Berhad
An investment holding company, distributes and retails of new and used Mazda, Peugeot, Kia, and XPeng vehicles in Malaysia and the Philippines.
Undervalued with excellent balance sheet and pays a dividend.