The Market Lifts ValueMax Group Limited (SGX:T6I) Shares 32% But It Can Do More

ValueMax Group Limited (SGX:T6I) shares have continued their recent momentum with a 32% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 96%.

Even after such a large jump in price, ValueMax Group's price-to-earnings (or "P/E") ratio of 9.1x 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 26x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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With earnings growth that's exceedingly strong of late, ValueMax Group 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.

View our latest analysis for ValueMax Group

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

Is There Any Growth For ValueMax Group?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 39% last year. The latest three year period has also seen an excellent 39% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 13% shows it's about the same on an annualised basis.

In light of this, it's peculiar that ValueMax Group's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On ValueMax Group's P/E

Despite ValueMax Group's shares building up a head of steam, its P/E still lags most other companies. 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 ValueMax Group revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with ValueMax Group (at least 1 which shouldn't be ignored), and understanding these should be part of your investment process.

If you're unsure about the strength of ValueMax Group's 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.