Market Cool On BH Global Corporation Limited's (SGX:BQN) Earnings Pushing Shares 27% Lower

BH Global Corporation Limited (SGX:BQN) shares have had a horrible month, losing 27% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 56% loss during that time.

Even after such a large drop in price, it's still not a stretch to say that BH Global's price-to-earnings (or "P/E") ratio of 8.9x right now seems quite "middle-of-the-road" compared to the market in Singapore, where the median P/E ratio is around 10x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Recent times have been quite advantageous for BH Global as its earnings have been rising very briskly. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for BH Global

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Want the full picture on earnings, revenue and cash flow for the company? Then our free report on BH Global will help you shine a light on its historical performance.

Does Growth Match The P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like BH Global's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 211% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

In contrast to the company, the rest of the market is expected to decline by 0.6% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

In light of this, it's peculiar that BH Global's P/E sits in line with the majority of other companies. It looks like most investors are not convinced the company can maintain its recent positive growth rate in the face of a shrinking broader market.

The Final Word

With its share price falling into a hole, the P/E for BH Global looks quite average now. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of BH Global revealed its growing earnings over the medium-term aren't contributing to its P/E as much as we would have predicted, given the market is set to shrink. When we see its superior earnings with some actual growth, we assume potential risks are what might be placing pressure on the P/E ratio. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader market turmoil. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Having said that, be aware BH Global is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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.

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