Even With A 26% Surge, Cautious Investors Are Not Rewarding Aztech Global Ltd.'s (SGX:8AZ) Performance Completely

Aztech Global Ltd. (SGX:8AZ) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

Although its price has surged higher, Aztech Global may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8x, since almost half of all companies in Singapore have P/E ratios greater than 12x and even P/E's higher than 21x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Aztech Global certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, 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.

See our latest analysis for Aztech Global

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

Is There Any Growth For Aztech Global?

The only time you'd be truly comfortable seeing a P/E as low as Aztech Global's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 49% gain to the company's bottom line. The latest three year period has also seen an excellent 44% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 7.7% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 6.5% each year, which is not materially different.

With this information, we find it odd that Aztech Global is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

Aztech Global's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

Our examination of Aztech Global's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook 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, but investors seem to think future earnings could see some volatility.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Aztech Global (of which 1 is potentially serious!) you should know about.

Of course, you might also be able to find a better stock than Aztech 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.