LOW PE

[#1]

Does anyone have an idea why this share is trading at a PE of around 5. Is it correct to assume then that this share is very undervalued and thus a good buy? I know it can be an indicator though that it is a bad company. Is this the case here? Any thoughs?

[dimitrius]

A positive PE under 10 doesn't mean that it's a bad company. In fact, if the company has a competitive advantage in its sector, and the sector is growing and has further growth potential, then it's a possible opportunity to pick up a share which is at a low price relative to its earnings. Of course, that PE that you read may not be accurate. There are a lot of things hidden in financial statements which could dilute the earnings per share. In other words, you've got to do your homework. Check out the company and its industry for growth potential, check that the EPS is accurate and if not, calculate the real EPS and then the real PE.

[geordie1]

You are correct this could be a buy signal for a good investment.I had a quick look.Bear in mind this is a young company 1999-so no great track record-it last paid a div in 1999 and there are no major institutional share holders.That to me says it is a speculative share-having said that the Directors look like they are buyers(good sign)and after some tricky years there financials are looking as if they may be turning round from a poor start.Do your own research and seeif this suits you.