Oncoclínicas do Brasil Serviços Médicos S.A.'s (BVMF:ONCO3) Share Price Is Still Matching Investor Opinion Despite 27% Slump

Unfortunately for some shareholders, the Oncoclínicas do Brasil Serviços Médicos S.A. (BVMF:ONCO3) share price has dived 27% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

Although its price has dipped substantially, given close to half the companies in Brazil have price-to-earnings ratios (or "P/E's") below 10x, you may still consider Oncoclínicas do Brasil Serviços Médicos as a stock to avoid entirely with its 16.7x 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 lofty.

Recent times have been advantageous for Oncoclínicas do Brasil Serviços Médicos as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Oncoclínicas do Brasil Serviços Médicos

Want the full picture on analyst estimates for the company? Then our free report on Oncoclínicas do Brasil Serviços Médicos will help you uncover what's on the horizon.

How Is Oncoclínicas do Brasil Serviços Médicos' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Oncoclínicas do Brasil Serviços Médicos' is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 343% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 52% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 16% per annum, which is noticeably less attractive.

In light of this, it's understandable that Oncoclínicas do Brasil Serviços Médicos' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Oncoclínicas do Brasil Serviços Médicos' shares may have retreated, but its P/E is still flying high. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Oncoclínicas do Brasil Serviços Médicos maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Oncoclínicas do Brasil Serviços Médicos (1 is significant!) 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.