Not Many Are Piling Into Genetec Technology Berhad (KLSE:GENETEC) Stock Yet As It Plummets 27%

The Genetec Technology Berhad (KLSE:GENETEC) share price has fared very poorly over the last month, falling by a substantial 27%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 26% share price drop.

In spite of the heavy fall in price, it's still not a stretch to say that Genetec Technology Berhad's price-to-earnings (or "P/E") ratio of 17.6x right now seems quite "middle-of-the-road" compared to the market in Malaysia, where the median P/E ratio is around 18x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Genetec Technology Berhad could be doing better as it's been growing earnings less than most other companies lately. One possibility is that the P/E is moderate because investors think this lacklustre earnings performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for Genetec Technology Berhad

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Genetec Technology Berhad.

Is There Some Growth For Genetec Technology Berhad?

In order to justify its P/E ratio, Genetec Technology Berhad would need to produce growth that's similar to the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 3.1% last year. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 46% over the next year. Meanwhile, the rest of the market is forecast to only expand by 18%, which is noticeably less attractive.

With this information, we find it interesting that Genetec Technology Berhad is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Genetec Technology Berhad's P/E?

Following Genetec Technology Berhad's share price tumble, its P/E is now hanging on to the median market P/E. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Genetec Technology Berhad currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for Genetec Technology Berhad that you need to take into consideration.

If you're unsure about the strength of Genetec Technology 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.