Take Care Before Jumping Onto V.S. Industry Berhad (KLSE:VS) Even Though It's 26% Cheaper
Unfortunately for some shareholders, the V.S. Industry Berhad (KLSE:VS) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.
Even after such a large drop in price, you could still be forgiven for feeling indifferent about V.S. Industry Berhad's P/E ratio of 14.7x, since the median price-to-earnings (or "P/E") ratio in Malaysia is also close to 14x. 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.
With earnings growth that's inferior to most other companies of late, V.S. Industry Berhad has been relatively sluggish. It might be that many expect the uninspiring earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
See our latest analysis for V.S. Industry Berhad
Is There Some Growth For V.S. Industry Berhad?
The only time you'd be comfortable seeing a P/E like V.S. Industry Berhad's is when the company's growth is tracking the market closely.
Retrospectively, the last year delivered a decent 2.7% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen an unpleasant 12% overall drop in EPS. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 23% per annum during the coming three years according to the twelve analysts following the company. With the market only predicted to deliver 9.6% per year, the company is positioned for a stronger earnings result.
With this information, we find it interesting that V.S. Industry Berhad is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.
The Bottom Line On V.S. Industry Berhad's P/E
V.S. Industry Berhad's plummeting stock price has brought its P/E right back to the rest of the market. 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 V.S. Industry 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.
You should always think about risks. Case in point, we've spotted 2 warning signs for V.S. Industry Berhad you should be aware of.
If these risks are making you reconsider your opinion on V.S. Industry Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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:VS
V.S. Industry Berhad
An investment holding company, engages in the manufacturing, assembling and selling electronic and electrical products, and plastic molded components and parts.
Excellent balance sheet with reasonable growth potential and pays a dividend.
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