Slammed 28% Bonny Worldwide Limited (TWSE:8467) Screens Well Here But There Might Be A Catch

Unfortunately for some shareholders, the Bonny Worldwide Limited (TWSE:8467) share price has dived 28% in the last thirty days, prolonging recent pain. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 21%.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Bonny Worldwide's P/E ratio of 21.9x, since the median price-to-earnings (or "P/E") ratio in Taiwan is also close to 21x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With earnings growth that's exceedingly strong of late, Bonny Worldwide has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Bonny Worldwide

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Bonny Worldwide will help you shine a light on its historical performance.

How Is Bonny Worldwide's Growth Trending?

In order to justify its P/E ratio, Bonny Worldwide would need to produce growth that's similar to the market.

Retrospectively, the last year delivered an exceptional 69% gain to the company's bottom line. Pleasingly, EPS has also lifted 588% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 20% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that Bonny Worldwide's P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

With its share price falling into a hole, the P/E for Bonny Worldwide looks quite average now. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Bonny Worldwide currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

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

If these risks are making you reconsider your opinion on Bonny Worldwide, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.