Even With A 25% Surge, Cautious Investors Are Not Rewarding Geo Energy Resources Limited's (SGX:RE4) Performance Completely

Geo Energy Resources Limited (SGX:RE4) shares have had a really impressive month, gaining 25% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.6% in the last twelve months.

Even after such a large jump in price, Geo Energy Resources may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9.1x, since almost half of all companies in Singapore have P/E ratios greater than 12x and even P/E's higher than 22x 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 limited.

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Geo Energy Resources 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 Geo Energy Resources

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Geo Energy Resources.

Is There Any Growth For Geo Energy Resources?

Geo Energy Resources' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 40% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 79% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 87% per year as estimated by the dual analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 9.4% each year, which is noticeably less attractive.

In light of this, it's peculiar that Geo Energy Resources' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Geo Energy Resources' P/E

The latest share price surge wasn't enough to lift Geo Energy Resources' P/E close to the market median. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Geo Energy Resources' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. When we see a strong earnings outlook 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, but investors seem to think future earnings could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Geo Energy Resources you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.