Take Care Before Diving Into The Deep End On Jardine Cycle & Carriage Limited (SGX:C07)

When close to half the companies in Singapore have price-to-earnings ratios (or "P/E's") above 12x, you may consider Jardine Cycle & Carriage Limited (SGX:C07) as an attractive investment with its 8.3x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Jardine Cycle & Carriage 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.

View our latest analysis for Jardine Cycle & Carriage

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jardine Cycle & Carriage.

How Is Jardine Cycle & Carriage's Growth Trending?

In order to justify its P/E ratio, Jardine Cycle & Carriage would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 43% in total over the last three years. 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.

Turning to the outlook, the next three years should generate growth of 8.8% per year as estimated by the five analysts watching the company. That's shaping up to be similar to the 7.8% per year growth forecast for the broader market.

In light of this, it's peculiar that Jardine Cycle & Carriage's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Jardine Cycle & Carriage'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.

Our examination of Jardine Cycle & Carriage's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Jardine Cycle & Carriage that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.