Improved Earnings Required Before Emirates Telecommunications Group Company PJSC (ADX:EAND) Shares Find Their Feet

When close to half the companies in the United Arab Emirates have price-to-earnings ratios (or "P/E's") above 14x, you may consider Emirates Telecommunications Group Company PJSC (ADX:EAND) as an attractive investment with its 11.1x 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 limited.

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With earnings growth that's superior to most other companies of late, Emirates Telecommunications Group Company PJSC 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 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.

View our latest analysis for Emirates Telecommunications Group Company PJSC

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Emirates Telecommunications Group Company PJSC.

Is There Any Growth For Emirates Telecommunications Group Company PJSC?

The only time you'd be truly comfortable seeing a P/E as low as Emirates Telecommunications Group Company PJSC's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 27% gain to the company's bottom line. The latest three year period has also seen an excellent 49% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should bring diminished returns, with earnings decreasing 1.4% per annum as estimated by the eleven analysts watching the company. With the market predicted to deliver 9.8% growth per year, that's a disappointing outcome.

With this information, we are not surprised that Emirates Telecommunications Group Company PJSC 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. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On Emirates Telecommunications Group Company PJSC'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 Emirates Telecommunications Group Company PJSC maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Emirates Telecommunications Group Company PJSC (1 shouldn't be ignored!) that you need to be mindful of.

If you're unsure about the strength of Emirates Telecommunications Group Company PJSC's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.