Rex International Holding Limited's (SGX:5WH) price-to-earnings (or "P/E") ratio of 4.6x might make it look like a strong buy right now compared to the market in Singapore, where around half of the companies have P/E ratios above 11x and even P/E's above 18x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Rex International Holding has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Rex International Holding

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Rex International Holding.

How Is Rex International Holding's Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Rex International Holding's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 57%. Pleasingly, EPS has also lifted 67% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

The Key Takeaway

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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Rex International Holding (of which 1 makes us a bit uncomfortable!) you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a P/E below 20x.

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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