Sembcorp Industries Ltd's (SGX:U96) Earnings Haven't Escaped The Attention Of Investors

It's not a stretch to say that Sembcorp Industries Ltd's (SGX:U96) price-to-earnings (or "P/E") ratio of 11.9x right now seems quite "middle-of-the-road" compared to the market in Singapore, where the median P/E ratio is around 13x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Sembcorp Industries could be doing better as it's been growing earnings less than most other companies lately. It might be that many expect the uninspiring earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Sembcorp Industries

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

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

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

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow EPS by an impressive 687% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 8.5% per year during the coming three years according to the analysts following the company. With the market predicted to deliver 8.9% growth per year, the company is positioned for a comparable earnings result.

In light of this, it's understandable that Sembcorp Industries' P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Sembcorp Industries' 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.

As we suspected, our examination of Sembcorp Industries' analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. 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.

Plus, you should also learn about these 2 warning signs we've spotted with Sembcorp Industries (including 1 which is significant).

You might be able to find a better investment than Sembcorp Industries. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.