VSTECS Berhad (KLSE:VSTECS) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

VSTECS Berhad (KLSE:VSTECS) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 141% in the last twelve months.

Even after such a large drop in price, it's still not a stretch to say that VSTECS Berhad's price-to-earnings (or "P/E") ratio of 17.5x right now seems quite "middle-of-the-road" compared to the market in Malaysia, where the median P/E ratio is around 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

VSTECS Berhad's earnings growth of late has been pretty similar to most other companies. It seems that many are expecting the mediocre earnings performance to persist, which has held the P/E back. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

See our latest analysis for VSTECS Berhad

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Is There Some Growth For VSTECS Berhad?

The only time you'd be comfortable seeing a P/E like VSTECS Berhad's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a worthy increase of 6.8%. The latest three year period has also seen an excellent 57% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 16% each year as estimated by the lone analyst watching the company. With the market predicted to deliver 15% growth per annum, the company is positioned for a comparable earnings result.

In light of this, it's understandable that VSTECS Berhad's P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

VSTECS Berhad's plummeting stock price has brought its P/E right back to the rest of the market. 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.

As we suspected, our examination of VSTECS Berhad's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

It is also worth noting that we have found 2 warning signs for VSTECS Berhad that you need to take into consideration.

If you're unsure about the strength of VSTECS 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com