Aspen (Group) Holdings Limited (SGX:1F3) shares have continued their recent momentum with a 48% gain in the last month alone.    The last 30 days bring the annual gain to a very sharp 64%.  

Although its price has surged higher, given about half the companies in Singapore have price-to-earnings ratios (or "P/E's") above 12x, you may still consider Aspen (Group) Holdings as an attractive investment with its 6.5x P/E ratio.  However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.  

For example, consider that Aspen (Group) Holdings' financial performance has been poor lately as its earnings have been in decline.   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.    

SGX:1F3 Price to Earnings Ratio vs Industry April 9th 2024

Although there are no analyst estimates available for Aspen (Group) Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.  

Does Growth Match The Low P/E?  

Aspen (Group) Holdings' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.  

Retrospectively, the last year delivered a frustrating 18% decrease to the company's bottom line.   This means it has also seen a slide in earnings over the longer-term as EPS is down 56% in total over the last three years.  So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.  

Comparing that to the market, which is predicted to deliver 11% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

In light of this, it's understandable that Aspen (Group) Holdings' P/E would sit below the majority of other companies.  However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment.  Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.  

What We Can Learn From Aspen (Group) Holdings' P/E?

Aspen (Group) Holdings' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights.      Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Aspen (Group) Holdings maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected.  Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises.  Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for Aspen (Group) Holdings (2 are a bit concerning!) that you need to be mindful of.  

If you're unsure about the strength of Aspen (Group) Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.