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Maiden Holdings, Ltd.'s (NASDAQ:MHLD) Earnings Are Not Doing Enough For Some Investors

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 16x, you may consider Maiden Holdings, Ltd. (NASDAQ:MHLD) as a highly attractive investment with its 4x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

For instance, Maiden Holdings' receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. If you 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.

Check out our latest analysis for Maiden Holdings

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Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Maiden Holdings will help you shine a light on its historical performance.

Is There Any Growth For Maiden Holdings?

In order to justify its P/E ratio, Maiden Holdings would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 64%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. 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 10.0% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Maiden 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 Bottom Line On Maiden Holdings' P/E

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 Maiden 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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Maiden Holdings (of which 2 shouldn't be ignored!) you should know about.

If you're unsure about the strength of Maiden Holdings' 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.