The Willas-Array Electronics (Holdings) Limited (SGX:BDR) share price has fared very poorly over the last month, falling by a substantial 25%. Longer-term shareholders would now have taken a real hit with the stock declining 6.6% in the last year.

Since its price has dipped substantially, Willas-Array Electronics (Holdings) may be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.3x, since almost half of all companies in Singapore have P/E ratios greater than 11x and even P/E's higher than 19x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

As an illustration, earnings have deteriorated at Willas-Array Electronics (Holdings) over the last year, which is not ideal at all. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Willas-Array Electronics (Holdings)

Does Growth Match The Low P/E?

Willas-Array Electronics (Holdings)'s P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 11%. 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. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

This is in contrast to the rest of the market, which is expected to grow by 4.1% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Willas-Array Electronics (Holdings) is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

Having almost fallen off a cliff, Willas-Array Electronics (Holdings)'s share price has pulled its P/E way down as well. 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 Willas-Array Electronics (Holdings) maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Willas-Array Electronics (Holdings).

If you're unsure about the strength of Willas-Array Electronics (Holdings)'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.