Not Many Are Piling Into Vienna Insurance Group AG (VIE:VIG) Just Yet

With a price-to-earnings (or "P/E") ratio of 5x 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 9x and even P/E's higher than 16x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

The earnings growth achieved at Vienna Insurance Group over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. 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.

See our latest analysis for Vienna Insurance Group

Although there are no analyst estimates available for Vienna Insurance Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Vienna Insurance Group?

In order to justify its P/E ratio, Vienna Insurance Group would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 22% last year. The strong recent performance means it was also able to grow EPS by 113% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing the recent medium-term upward earnings trajectory against the broader market's one-year forecast for contraction of 0.7% shows it's a great look while it lasts.

With this information, we find it very odd that Vienna Insurance Group is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits 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 revealed its growing earnings over the medium-term aren't contributing to its P/E anywhere near as much as we would have predicted, given the market is set to shrink. We think potential risks might be placing significant pressure on the P/E ratio and share price. One major risk is whether its earnings trajectory can keep outperforming under these tough market conditions. At least the risk of a price drop looks to be subdued, but investors think future earnings could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Vienna Insurance Group 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.

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.