With nearly half of Malaysian companies having a price-to-earnings ratio (or “P/E”) of less than 16 times, you may want to consider: Mr. DIY Group (M) Berhad (KLSE:MRDIY) has a P/E ratio of 25.4x, which makes it a stock to avoid completely. Nevertheless, we need to dig a little deeper to determine whether there is a rational basis for the P/E ratio being so elevated.
DIY Group (M) Berhad has certainly been doing a good job recently, growing its earnings faster than most other companies. The P/E ratio is high because investors believe this strong performance will continue. If you don't hope so, you will end up paying a very high price for no particular reason.
Check out our latest analysis for Mr DIY Group (M) Berhad.
If you want to know what analysts are predicting for the future, check out this article. free Report by Mr DIY Group (M) Berhad.
What are the growth trends of Mr DIY Group (M) Berhad?
DIY Group (M) The only time it's really reassuring to see a P/E ratio as steep as Berhad's is when the company's growth is clearly on track to outpace the market.
Looking back, the company saw its revenue grow by an exceptional 18% last year. However, this was not enough, as his EPS over the last three years totaled him a very unpleasant 56% decline. So, unfortunately, we have to admit that the company hasn't done much to grow its revenue over that time.
Turning to the outlook, analysts monitoring the company estimate that it is expected to grow 14% annually over the next three years. This figure is shaping up to be significantly higher than the broader market's annual growth forecast of 12%.
This information helps explain why Mr DIY Group (M) Berhad is trading at a very high P/E compared to the market. Apparently shareholders aren't keen on parting with something that could have a richer future ahead of them.
The last word
Although the price-to-earnings ratio should not be the deciding factor in whether or not to buy a stock, it is a very useful barometer of earnings expectations.
As expected, we find that Mr DIY Group (M) Berhad maintains a high P/E ratio, on the strength of its higher growth forecasts than the broader market. At the moment, shareholders are satisfied with the P/E ratio as they are confident that future earnings are not threatened. Under these circumstances, it is unlikely that stock prices will fall significantly in the near future.
That being said, please be careful Mr DIY Group (M) Berhad is showing 1 warning sign In our investment analysis, you need to know:
You might be able to find a better investment than Mr DIY Group (M) Berhad.If you would like to narrow down your list of candidates, please click here free A list of interesting companies that trade at low P/E ratios (but have proven they can grow earnings).
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Please check it out Mr. DIY Group (M) Berhad Could be overvalued or undervalued, check out our comprehensive analysis. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.