I’m researching on this company Karex Bhd and come to the valuation part, I was calculating its PE ratio and this question came to my mind:
- When calculating current PE ratio, do I use the trailing 12 months EPS or EPS for the latest FYE of the Company?
- Is TTM PE much more reliable than using the PE based on latest FYE’s EPS?
The recent quarter results of this Company has been bad due to high distribution expenses, higher rubber prices and the private placement expenses which is one-off. Hence, the share price of this Company has dipped abit to 52 weeks low. However, the TTM PE is still high (51 times) as compared to IQ’s Rule-of-thumbs. Whats your take on this?
Well, Karex only listed on November 2013. So I only calculated its 3 year Historical PE based on adjusted closing prices on the date where the Company announces its 4th quarter results:
If I were to use the TTM PE and compare against its historical PE, it seems very expensive right now. But if I calculate the current PE based on its 2016 EPS is 30.8 times; this result seems like its undervalued right now. So, I’m abit confused as to which PE ratio should I use.
Since their Latest earnings are being affected. You can take share price dividend by their average earnings to get their normalised PE.
On the side note why you do you feel Karex is undervalue right now?
Great analysis keep it up. Have you find the average PE trading range of Karex competitors and see whether they are trading premium or below their industry average PE.
On the side note I understand Karex want to do their own brand manufacturing but from my experience it is a different model compare to manufacturing. For instance, you look at the company that owned Durex, they just focus on marketing their product and outsource their manufacturing. Hence, for Karex business now they have to focus on manufacturing and marketing at the same time. Since manufacturing is their core profit hence they will definitely focus their attention there instead on the brand side. Of course it is too early to say, we have to track the management along the way.
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