Market Cool On TASCO Berhad's (KLSE:TASCO) Earnings Pushing Shares 26% Lower

To the annoyance of some shareholders, TASCO Berhad (KLSE:TASCO) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 41% share price drop.

In spite of the heavy fall in price, TASCO Berhad's price-to-earnings (or "P/E") ratio of 8.3x might still 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 15x and even P/E's above 24x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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TASCO 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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for TASCO Berhad

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Is There Any Growth For TASCO Berhad?

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

Retrospectively, the last year delivered a frustrating 28% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 17% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 23% over the next year. That's shaping up to be materially higher than the 15% growth forecast for the broader market.

With this information, we find it odd that TASCO Berhad is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

The softening of TASCO Berhad's shares means its P/E is now sitting at a pretty low level. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of TASCO Berhad's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware TASCO Berhad is showing 2 warning signs in our investment analysis, you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.