Subdued Growth No Barrier To Emirates Integrated Telecommunications Company PJSC's (DFM:DU) Price

There wouldn't be many who think Emirates Integrated Telecommunications Company PJSC's (DFM:DU) price-to-earnings (or "P/E") ratio of 14.2x is worth a mention when the median P/E in the United Arab Emirates is similar at about 13x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been advantageous for Emirates Integrated Telecommunications Company PJSC as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Emirates Integrated Telecommunications Company PJSC

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

How Is Emirates Integrated Telecommunications Company PJSC's Growth Trending?

In order to justify its P/E ratio, Emirates Integrated Telecommunications Company PJSC would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 52%. The strong recent performance means it was also able to grow EPS by 52% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 0.3% per year as estimated by the six analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 4.4% each year, which is noticeably more attractive.

With this information, we find it interesting that Emirates Integrated Telecommunications Company PJSC is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

What We Can Learn From Emirates Integrated Telecommunications 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 Integrated Telecommunications Company PJSC currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about this 1 warning sign we've spotted with Emirates Integrated Telecommunications Company PJSC.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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.