Earnings Not Telling The Story For Österreichische Post AG (VIE:POST)

There wouldn't be many who think Österreichische Post AG's (VIE:POST) price-to-earnings (or "P/E") ratio of 14.9x is worth a mention when the median P/E in Austria is similar at about 13x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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With its earnings growth in positive territory compared to the declining earnings of most other companies, Österreichische Post has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. 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 not quite in favour.

Check out our latest analysis for Österreichische Post

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

What Are Growth Metrics Telling Us About The P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like Österreichische Post's to be considered reasonable.

If we review the last year of earnings growth, the company posted a worthy increase of 4.0%. However, this wasn't enough as the latest three year period has seen an unpleasant 9.5% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 3.8% per year as estimated by the dual analysts watching the company. That's shaping up to be materially lower than the 9.0% per annum growth forecast for the broader market.

In light of this, it's curious that Österreichische Post's P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

What We Can Learn From Österreichische Post's P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Österreichische Post currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 1 warning sign for Österreichische Post that we have uncovered.

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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.