It's A Story Of Risk Vs Reward With Allianz Malaysia Berhad (KLSE:ALLIANZ)

Allianz Malaysia Berhad's (KLSE:ALLIANZ) price-to-earnings (or "P/E") ratio of 8.3x might make it look like a buy right now compared to the market in Malaysia, where around half of the companies have P/E ratios above 14x and even P/E's above 26x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Allianz Malaysia Berhad hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Allianz Malaysia Berhad

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Keen to find out how analysts think Allianz Malaysia Berhad's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Allianz Malaysia Berhad's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 14% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 17% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 7.9% each year during the coming three years according to the five analysts following the company. With the market predicted to deliver 9.2% growth per annum, the company is positioned for a comparable earnings result.

In light of this, it's peculiar that Allianz Malaysia Berhad's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Allianz Malaysia 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.

Our examination of Allianz Malaysia Berhad's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like 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.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Allianz Malaysia Berhad that you should be aware of.

If you're unsure about the strength of Allianz Malaysia Berhad's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.

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