Wilmar International Limited's (SGX:F34) price-to-earnings (or "P/E") ratio of 8.8x might make it look like a buy right now compared to the market in Singapore, where around half of the companies have P/E ratios above 12x and even P/E's above 21x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

While the market has experienced earnings growth lately, Wilmar International's earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Wilmar International

SGX:F34 Price to Earnings Ratio vs Industry January 13th 2025

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

How Is Wilmar International's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 13% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 6.0% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 5.1% each year over the next three years. That's shaping up to be materially lower than the 10% per year growth forecast for the broader market.

In light of this, it's understandable that Wilmar International's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Wilmar International's P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Wilmar International's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Wilmar International you should be aware of, and 1 of them makes us a bit uncomfortable.

You might be able to find a better investment than Wilmar International. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Valuation is complex, but we're here to simplify it.

Discover if Wilmar International might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.