Beng Kuang Marine Limited's (SGX:BEZ) Price Is Right But Growth Is Lacking

With a price-to-earnings (or "P/E") ratio of 11.1x Beng Kuang Marine Limited (SGX:BEZ) may be sending bullish signals at the moment, given that almost half of all companies in Singapore have P/E ratios greater than 15x and even P/E's higher than 26x 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.

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Beng Kuang Marine hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Is There Any Growth For Beng Kuang Marine?

Beng Kuang Marine's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 54% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 166% overall rise in EPS, in spite of its unsatisfying short-term performance. 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.

Looking ahead now, EPS is anticipated to slump, contracting by 2.9% per annum during the coming three years according to the lone analyst following the company. Meanwhile, the broader market is forecast to expand by 9.8% per annum, which paints a poor picture.

With this information, we are not surprised that Beng Kuang Marine is trading at a P/E lower than the market. 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.

The Bottom Line On Beng Kuang Marine's P/E

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 Beng Kuang Marine'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. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Beng Kuang Marine you should know about.

If these risks are making you reconsider your opinion on Beng Kuang Marine, 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.