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华尔街日报Pinning Down Heineken Malaysia Berhad's (KLSE:HEIM) P/E Is Difficult Right Now
There wouldn't be many who think Heineken Malaysia Berhad's (KLSE:HEIM) price-to-earnings (or "P/E") ratio of 15x is worth a mention when the median P/E in Malaysia is similar at about 14x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
Recent times have been advantageous for Heineken Malaysia Berhad as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.
View our latest analysis for Heineken Malaysia Berhad
Is There Some Growth For Heineken Malaysia Berhad?
There's an inherent assumption that a company should be matching the market for P/E ratios like Heineken Malaysia Berhad's to be considered reasonable.
If we review the last year of earnings growth, the company posted a worthy increase of 8.0%. The solid recent performance means it was also able to grow EPS by 14% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 0.2% during the coming year according to the eight analysts following the company. Meanwhile, the rest of the market is forecast to expand by 15%, which is noticeably more attractive.
In light of this, it's curious that Heineken Malaysia Berhad's P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.
What We Can Learn From Heineken Malaysia Berhad's P/E?
We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that Heineken Malaysia Berhad currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
It is also worth noting that we have found 1 warning sign for Heineken Malaysia Berhad that you need to take into consideration.
If you're unsure about the strength of Heineken Malaysia Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.