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Genting Berhad's (KLSE:GENTING) Shares Not Telling The Full Story

Simply Wall St · 04/15 02:41

There wouldn't be many who think Genting Berhad's (KLSE:GENTING) price-to-earnings (or "P/E") ratio of 14.3x is worth a mention when the median P/E in Malaysia is similar at about 13x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Genting Berhad hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for Genting Berhad

pe-multiple-vs-industry
KLSE:GENTING Price to Earnings Ratio vs Industry April 15th 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Genting Berhad.

How Is Genting Berhad's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 5.0% decrease to the company's bottom line. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 26% each year over the next three years. That's shaping up to be materially higher than the 9.5% each year growth forecast for the broader market.

With this information, we find it interesting that Genting Berhad is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Genting Berhad's P/E

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Genting Berhad currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Genting Berhad, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Genting Berhad, explore our interactive list of high quality stocks to get an idea of what else is out there.