BH Global Corporation Limited's (SGX:BQN) P/E Is Still On The Mark Following 27% Share Price Bounce

BH Global Corporation Limited (SGX:BQN) shares have had a really impressive month, gaining 27% after a shaky period beforehand. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

After such a large jump in price, BH Global may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.5x, since almost half of all companies in Singapore have P/E ratios under 11x and even P/E's lower than 7x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

The recent earnings growth at BH Global would have to be considered satisfactory if not spectacular. It might be that many expect the reasonable earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out 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.

Does Growth Match The High P/E?

In order to justify its P/E ratio, BH Global would need to produce impressive growth in excess of the market.

If we review the last year of earnings growth, the company posted a worthy increase of 5.5%. Pleasingly, EPS has also lifted 136% in aggregate from three years ago, partly thanks to the last 12 months of growth. 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. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Bottom Line On BH Global's P/E

The large bounce in BH Global's shares has lifted the company's P/E to a fairly high level. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of BH Global revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware BH Global is showing 3 warning signs in our investment analysis, and 1 of those can't be ignored.

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.