Telekom Austria AG's (VIE:TKA) Business And Shares Still Trailing The Market

When close to half the companies in Austria have price-to-earnings ratios (or "P/E's") above 16x, you may consider Telekom Austria AG (VIE:TKA) as an attractive investment with its 9.5x 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 limited.

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Recent times have been pleasing for Telekom Austria as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

Check out our latest analysis for Telekom Austria

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Telekom Austria.

Is There Any Growth For Telekom Austria?

The only time you'd be truly comfortable seeing a P/E as low as Telekom Austria's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.2% last year. The latest three year period has also seen a 23% overall rise in EPS, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 4.6% each year during the coming three years according to the five analysts following the company. With the market predicted to deliver 9.1% growth each year, the company is positioned for a weaker earnings result.

With this information, we can see why Telekom Austria is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Telekom Austria maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Telekom Austria with six simple checks will allow you to discover any risks that could be an issue.

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.