Ackermans & Van Haaren NV's (EBR:ACKB) Low P/E No Reason For Excitement

When close to half the companies in Belgium have price-to-earnings ratios (or "P/E's") above 14x, you may consider Ackermans & Van Haaren NV (EBR:ACKB) as an attractive investment with its 9.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With earnings growth that's superior to most other companies of late, Ackermans & Van Haaren has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Ackermans & Van Haaren

Want the full picture on analyst estimates for the company? Then our free report on Ackermans & Van Haaren will help you uncover what's on the horizon.

How Is Ackermans & Van Haaren's Growth Trending?

Ackermans & Van Haaren's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 36% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 76% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the two analysts covering the company suggest earnings growth is heading into negative territory, declining 11% per annum over the next three years. With the market predicted to deliver 7.8% growth per annum, that's a disappointing outcome.

With this information, we are not surprised that Ackermans & Van Haaren is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Bottom Line On Ackermans & Van Haaren'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.

We've established that Ackermans & Van Haaren maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Ackermans & Van Haaren (1 is a bit concerning) you should be aware of.

You might be able to find a better investment than Ackermans & Van Haaren. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

If you’re looking to trade Ackermans & Van Haaren, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.