Investors Interested In Avi-Tech Holdings Limited's (SGX:1R6) Earnings

With a median price-to-earnings (or "P/E") ratio of close to 11x in Singapore, you could be forgiven for feeling indifferent about Avi-Tech Holdings Limited's (SGX:1R6) P/E ratio of 12.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times haven't been advantageous for Avi-Tech Holdings as its earnings have been rising slower than most other companies. One possibility is that the P/E is moderate because investors think this lacklustre earnings performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Check out our latest analysis for Avi-Tech Holdings

Want the full picture on analyst estimates for the company? Then our free report on Avi-Tech Holdings will help you uncover what's on the horizon.

Does Growth Match The P/E?

The only time you'd be comfortable seeing a P/E like Avi-Tech Holdings' is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.0% last year. This was backed up an excellent period prior to see EPS up by 30% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest earnings should grow by 6.1% per year over the next three years. Meanwhile, the rest of the market is forecast to expand by 7.2% per annum, which is not materially different.

With this information, we can see why Avi-Tech Holdings is trading at a fairly similar P/E to the market. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Avi-Tech Holdings' P/E?

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Avi-Tech Holdings maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Avi-Tech Holdings you should be aware of.

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 P/E ratio below 20x).

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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.