Abu Dhabi Ports Company PJSC's (ADX:ADPORTS) Earnings Haven't Escaped The Attention Of Investors

When close to half the companies in the United Arab Emirates have price-to-earnings ratios (or "P/E's") below 13x, you may consider Abu Dhabi Ports Company PJSC (ADX:ADPORTS) as a stock to avoid entirely with its 24.8x 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.

Abu Dhabi Ports Company PJSC could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Abu Dhabi Ports Company PJSC

Keen to find out how analysts think Abu Dhabi Ports Company PJSC's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Abu Dhabi Ports Company PJSC's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Abu Dhabi Ports Company PJSC's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 23%. Even so, admirably EPS has lifted 121% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 27% per annum during the coming three years according to the four analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 6.7% per year, which is noticeably less attractive.

With this information, we can see why Abu Dhabi Ports Company PJSC is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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 Abu Dhabi Ports Company PJSC maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Abu Dhabi Ports Company PJSC (of which 1 makes us a bit uncomfortable!) you should know about.

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.

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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.