Investors Continue Waiting On Sidelines For Vienna Insurance Group AG (VIE:VIG)

With a price-to-earnings (or "P/E") ratio of 7.1x Vienna Insurance Group AG (VIE:VIG) may be sending bullish signals at the moment, given that almost half of all companies in Austria have P/E ratios greater than 12x and even P/E's higher than 18x 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 limited.

There hasn't been much to differentiate Vienna Insurance Group's and the market's earnings growth lately. One possibility is that the P/E is low because investors think this modest earnings performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

View our latest analysis for Vienna Insurance Group

Want the full picture on analyst estimates for the company? Then our free report on Vienna Insurance Group will help you uncover what's on the horizon.

Is There Any Growth For Vienna Insurance Group?

There's an inherent assumption that a company should underperform the market for P/E ratios like Vienna Insurance Group's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 19% last year. Pleasingly, EPS has also lifted 138% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 8.5% per annum over the next three years. That's shaping up to be materially higher than the 4.1% each year growth forecast for the broader market.

With this information, we find it odd that Vienna Insurance Group is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

Our examination of Vienna Insurance Group's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

You always need to take note of risks, for example - Vienna Insurance Group has 1 warning sign we think you should be aware of.

You might be able to find a better investment than Vienna Insurance Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.