After Leaping 47% BH Global Corporation Limited (SGX:BQN) Shares Are Not Flying Under The Radar

The BH Global Corporation Limited (SGX:BQN) share price has done very well over the last month, posting an excellent gain of 47%. The annual gain comes to 108% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, given close to half the companies in Singapore have price-to-earnings ratios (or "P/E's") below 11x, you may consider BH Global as a stock to avoid entirely with its 19.9x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

The recent earnings growth at BH Global would have to be considered satisfactory if not spectacular. One possibility is that the P/E is high because investors think this good earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

View our latest analysis for BH Global

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on BH Global will help you shine a light on its historical performance.

Is There Enough Growth For BH Global?

The only time you'd be truly comfortable seeing a P/E as steep as BH Global's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a decent 5.5% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 136% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 7.5% shows it's noticeably more attractive on an annualised basis.

With this information, we can see why BH Global is trading at such a high P/E compared to the market. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Key Takeaway

Shares in BH Global have built up some good momentum lately, which has really inflated its P/E. 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 BH Global maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for BH Global (1 is a bit concerning!) that you need to take into consideration.

Of course, you might also be able to find a better stock than BH Global. 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.