Harbour-Link Group Berhad's (KLSE:HARBOUR) Shares Leap 28% Yet They're Still Not Telling The Full Story

Harbour-Link Group Berhad (KLSE:HARBOUR) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Looking further back, the 20% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, Harbour-Link Group Berhad's price-to-earnings (or "P/E") ratio of 6.4x might still make it look like a strong buy right now compared to the market in Malaysia, where around half of the companies have P/E ratios above 18x and even P/E's above 32x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

As an illustration, earnings have deteriorated at Harbour-Link Group Berhad over the last year, which is not ideal at all. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Harbour-Link Group Berhad

Although there are no analyst estimates available for Harbour-Link Group Berhad, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Harbour-Link Group Berhad?

Harbour-Link Group Berhad's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Retrospectively, the last year delivered a frustrating 51% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 261% 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.

This is in contrast to the rest of the market, which is expected to grow by 17% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Harbour-Link Group Berhad's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From Harbour-Link Group Berhad's P/E?

Even after such a strong price move, Harbour-Link Group Berhad's P/E still trails the rest of the market significantly. 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.

Our examination of Harbour-Link Group Berhad revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Harbour-Link Group Berhad you should know about.

Of course, you might also be able to find a better stock than Harbour-Link Group Berhad. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.