Shareholders Should Be Pleased With DO & CO Aktiengesellschaft's (VIE:DOC) Price

With a price-to-earnings (or "P/E") ratio of 25.5x DO & CO Aktiengesellschaft (VIE:DOC) may be sending very bearish signals at the moment, given that almost half of all companies in Austria have P/E ratios under 8x and even P/E's lower than 6x are not unusual. 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.

With earnings growth that's superior to most other companies of late, DO & CO has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for DO & CO

Keen to find out how analysts think DO & CO's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For DO & CO?

There's an inherent assumption that a company should far outperform the market for P/E ratios like DO & CO's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 207%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 23% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 2.0% per annum, which is noticeably less attractive.

In light of this, it's understandable that DO & CO's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On DO & CO'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.

As we suspected, our examination of DO & CO's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - DO & CO has 1 warning sign we think you should be aware of.

If you're unsure about the strength of DO & CO'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.