CSE Global Limited's (SGX:544) P/E Is Still On The Mark Following 37% Share Price Bounce

CSE Global Limited (SGX:544) shares have continued their recent momentum with a 37% gain in the last month alone. The annual gain comes to 127% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, CSE Global's price-to-earnings (or "P/E") ratio of 26.2x might make it look like a strong sell right now compared to the market in Singapore, where around half of the companies have P/E ratios below 14x and even P/E's below 8x 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 so lofty.

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While the market has experienced earnings growth lately, CSE Global's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for CSE Global

Keen to find out how analysts think CSE Global's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The High P/E?

CSE Global's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered a frustrating 6.5% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 107% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 22% each year over the next three years. With the market only predicted to deliver 12% per year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that CSE Global's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

The strong share price surge has got CSE Global's P/E rushing to great heights as well. 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.

As we suspected, our examination of CSE Global's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

Before you take the next step, you should know about the 1 warning sign for CSE Global that we have uncovered.

Of course, you might also be able to find a better stock than CSE Global. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.