When close to half the companies in Estonia have price-to-earnings ratios (or “P/E’s”) above 15x, you may consider AS Ekspress Grupp (TAL:EEG1T) as an attractive investment with its 7.5x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it’s justified.
AS Ekspress Grupp certainly has been doing a great job lately as it’s been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 AS Ekspress Grupp
We don’t have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on AS Ekspress Grupp’s earnings, revenue and cash flow.
Does Growth Match The Low P/E?
In order to justify its P/E ratio, AS Ekspress Grupp would need to produce sluggish growth that’s trailing the market.
If we review the last year of earnings growth, the company posted a terrific increase of 91%. As a result, it also grew EPS by 27% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.
Comparing that to the market, which is predicted to deliver 22% growth in the next 12 months, the company’s momentum is weaker based on recent medium-term annualised earnings results.
In light of this, it’s understandable that AS Ekspress Grupp’s P/E sits below the majority of other companies. Apparently many shareholders weren’t comfortable holding on to something they believe will continue to trail the bourse.
What We Can Learn From AS Ekspress Grupp’s P/E?
Typically, we’d caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
As we suspected, our examination of AS Ekspress Grupp revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn’t great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Don’t forget that there may be other risks. For instance, we’ve identified 2 warning signs for AS Ekspress Grupp that you should be aware of.
It’s important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
