Nasdaq
華爾街日報MClean Technologies Berhad (KLSE:MCLEAN) Held Back By Insufficient Growth Even After Shares Climb 27%
MClean Technologies Berhad (KLSE:MCLEAN) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The annual gain comes to 102% following the latest surge, making investors sit up and take notice.
In spite of the firm bounce in price, MClean Technologies Berhad may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11.4x, since almost half of all companies in Malaysia have P/E ratios greater than 14x and even P/E's higher than 25x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Recent times have been advantageous for MClean Technologies Berhad as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, 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.
Check out our latest analysis for MClean Technologies Berhad
Is There Any Growth For MClean Technologies Berhad?
In order to justify its P/E ratio, MClean Technologies Berhad would need to produce sluggish growth that's trailing the market.
If we review the last year of earnings growth, the company posted a terrific increase of 458%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
Looking ahead now, EPS is anticipated to slump, contracting by 13% during the coming year according to the one analyst following the company. Meanwhile, the broader market is forecast to expand by 15%, which paints a poor picture.
In light of this, it's understandable that MClean Technologies Berhad's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
What We Can Learn From MClean Technologies Berhad's P/E?
The latest share price surge wasn't enough to lift MClean Technologies Berhad's P/E close to the market median. 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.
As we suspected, our examination of MClean Technologies Berhad's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
It is also worth noting that we have found 4 warning signs for MClean Technologies Berhad (2 are potentially serious!) that you need to take into consideration.
You might be able to find a better investment than MClean Technologies Berhad. 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).
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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.