Investors Still Aren't Entirely Convinced By Asia Pacific Wire & Cable Corporation Limited's (NASDAQ:APWC) Earnings Despite 25% Price Jump

Asia Pacific Wire & Cable Corporation Limited (NASDAQ:APWC) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 41%.

Although its price has surged higher, Asia Pacific Wire & Cable may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11.7x, since almost half of all companies in the United States have P/E ratios greater than 19x and even P/E's higher than 35x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

For instance, Asia Pacific Wire & Cable's receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

View our latest analysis for Asia Pacific Wire & Cable

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Asia Pacific Wire & Cable's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

There's an inherent assumption that a company should underperform the market for P/E ratios like Asia Pacific Wire & Cable's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 22% 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 338% 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.

Comparing that to the market, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Asia Pacific Wire & Cable is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Asia Pacific Wire & Cable's P/E

Despite Asia Pacific Wire & Cable's shares building up a head of steam, its P/E still lags most other companies. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Asia Pacific Wire & Cable currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Asia Pacific Wire & Cable that you should be aware of.

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

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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.