Potential Upside For CJ Century Logistics Holdings Berhad (KLSE:CJCEN) Not Without Risk

With a median price-to-earnings (or "P/E") ratio of close to 15x in Malaysia, you could be forgiven for feeling indifferent about CJ Century Logistics Holdings Berhad's (KLSE:CJCEN) P/E ratio of 15.9x. 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.

CJ Century Logistics Holdings Berhad could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

See our latest analysis for CJ Century Logistics Holdings Berhad

Keen to find out how analysts think CJ Century Logistics Holdings Berhad's future stacks up against the industry? In that case, our free report is a great place to start.

How Is CJ Century Logistics Holdings Berhad's Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like CJ Century Logistics Holdings Berhad's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 46% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 170% overall rise in EPS, in spite of its unsatisfying short-term performance. 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 25% per annum during the coming three years according to the one analyst following the company. That's shaping up to be materially higher than the 15% per year growth forecast for the broader market.

With this information, we find it interesting that CJ Century Logistics Holdings 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 Final Word

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 CJ Century Logistics Holdings 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. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Plus, you should also learn about these 2 warning signs we've spotted with CJ Century Logistics Holdings Berhad.

You might be able to find a better investment than CJ Century Logistics Holdings Berhad. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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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.