Investors Don't See Light At End Of Swift Haulage Berhad's (KLSE:SWIFT) Tunnel

Swift Haulage Berhad's (KLSE:SWIFT) price-to-earnings (or "P/E") ratio of 7.7x might make it look like a buy right now compared to the market in Malaysia, where around half of the companies have P/E ratios above 14x and even P/E's above 22x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Swift Haulage Berhad could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

Check out our latest analysis for Swift Haulage Berhad

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

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Swift Haulage Berhad would need to produce sluggish growth that's trailing the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 35%. As a result, earnings from three years ago have also fallen 38% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 0.9% each year during the coming three years according to the four analysts following the company. That's shaping up to be materially lower than the 9.5% per year growth forecast for the broader market.

In light of this, it's understandable that Swift Haulage Berhad's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Swift Haulage Berhad's P/E

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.

As we suspected, our examination of Swift Haulage Berhad's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Swift Haulage Berhad (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.

You might be able to find a better investment than Swift Haulage Berhad. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (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.