Kingsmen Creatives Ltd. (SGX:5MZ) Stock Rockets 26% But Many Are Still Ignoring The Company

Kingsmen Creatives Ltd. (SGX:5MZ) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 76% in the last year.

Although its price has surged higher, Kingsmen Creatives' price-to-earnings (or "P/E") ratio of 7.5x might still make it look like a buy right now compared to the market in Singapore, where around half of the companies have P/E ratios above 14x and even P/E's above 25x 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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With earnings growth that's exceedingly strong of late, Kingsmen Creatives has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you 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 Kingsmen Creatives

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

How Is Kingsmen Creatives' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Kingsmen Creatives' is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 360% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 1,209% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 13% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that Kingsmen Creatives' P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From Kingsmen Creatives' P/E?

The latest share price surge wasn't enough to lift Kingsmen Creatives' P/E close to the market median. 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 Kingsmen Creatives currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Before you take the next step, you should know about the 3 warning signs for Kingsmen Creatives that we have uncovered.

If you're unsure about the strength of Kingsmen Creatives' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.