Earnings Tell The Story For Q & M Dental Group (Singapore) Limited (SGX:QC7) As Its Stock Soars 25%

Q & M Dental Group (Singapore) Limited (SGX:QC7) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 80%.

Following the firm bounce in price, Q & M Dental Group (Singapore) may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 52.8x, since almost half of all companies in Singapore have P/E ratios under 13x and even P/E's lower than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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Q & M Dental Group (Singapore) hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

View our latest analysis for Q & M Dental Group (Singapore)

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Q & M Dental Group (Singapore).

Does Growth Match The High P/E?

In order to justify its P/E ratio, Q & M Dental Group (Singapore) would need to produce outstanding growth well in excess of the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 44%. As a result, earnings from three years ago have also fallen 61% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 28% per year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 13% per annum growth forecast for the broader market.

With this information, we can see why Q & M Dental Group (Singapore) is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Q & M Dental Group (Singapore)'s P/E?

The strong share price surge has got Q & M Dental Group (Singapore)'s P/E rushing to great heights as well. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Q & M Dental Group (Singapore) maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Q & M Dental Group (Singapore) that you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.