When close to half the companies in Singapore have price-to-earnings ratios (or "P/E's") below 10x, you may consider Secura Group Limited (Catalist:43B) as a stock to potentially avoid with its 13.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's lofty.
The earnings growth achieved at Secura Group over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.
Check out our latest analysis for Secura Group
Although there are no analyst estimates available for Secura Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
How Is Secura Group's Growth Trending?
Secura Group's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.
Retrospectively, the last year delivered an exceptional 23% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 124% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
Weighing the recent medium-term upward earnings trajectory against the broader market's one-year forecast for contraction of 3.0% shows it's a great look while it lasts.
With this information, we can see why Secura Group is trading at a high P/E compared to the market. Investors are willing to pay more for a stock they hope will buck the trend of the broader market going backwards. Nonetheless, with most other businesses facing an uphill battle, staying on its current earnings path is no certainty.
The Key Takeaway
It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that Secura Group maintains its high P/E on the strength of its recentthree-year growth beating forecasts for a struggling market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader market turmoil. Although, if the company's relative performance doesn't change it will continue to provide strong support to the share price.
It is also worth noting that we have found 3 warning signs for Secura Group (1 is significant!) that you need to take into consideration.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).
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.
Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
Zinc Deficiency Associated with Hypothyroidism An Overlooked Cause of Severe Alopecia, 2013 tamoxifen versus raloxifene Trenbolone Tren is often considered the most powerful steroid availableREPLY