With a median price-to-earnings (or "P/E") ratio of close to 13x in Malaysia, you could be forgiven for feeling indifferent about Yenher Holdings Berhad's (KLSE:YENHER) P/E ratio of 11.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

The recent earnings growth at Yenher Holdings Berhad would have to be considered satisfactory if not spectacular. One possibility is that the P/E is moderate because investors think this good earnings growth might only be parallel to the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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How Is Yenher Holdings Berhad's Growth Trending?

The only time you'd be comfortable seeing a P/E like Yenher Holdings Berhad's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered a decent 6.9% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen an unpleasant 12% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 8.7% shows it's an unpleasant look.

With this information, we find it concerning that Yenher Holdings Berhad is trading at a fairly similar P/E to the market. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh on the share price eventually.

The Bottom Line On Yenher Holdings 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 Yenher Holdings Berhad currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.