share_log

Optimistic Investors Push A-Sonic Aerospace Limited (SGX:BTJ) Shares Up 25% But Growth Is Lacking

Simply Wall St ·  Jan 13 22:23

A-Sonic Aerospace Limited (SGX:BTJ) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 22% in the last twelve months.

Since its price has surged higher, A-Sonic Aerospace may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 28.3x, since almost half of all companies in Singapore have P/E ratios under 11x and even P/E's lower than 7x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

For example, consider that A-Sonic Aerospace's financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

big
SGX:BTJ Price to Earnings Ratio vs Industry January 13th 2025
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on A-Sonic Aerospace's earnings, revenue and cash flow.

How Is A-Sonic Aerospace's Growth Trending?

A-Sonic Aerospace's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 46%. This means it has also seen a slide in earnings over the longer-term as EPS is down 85% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

In contrast to the company, the rest of the market is expected to grow by 8.0% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

With this information, we find it concerning that A-Sonic Aerospace is trading at a P/E higher than the market. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

What We Can Learn From A-Sonic Aerospace's P/E?

A-Sonic Aerospace's P/E is flying high just like its stock has during the last month. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that A-Sonic Aerospace currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you settle on your opinion, we've discovered 5 warning signs for A-Sonic Aerospace (1 doesn't sit too well with us!) that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
Comment Comment · Views 227

Recommended

Write a comment