Cenergy Holdings SA (EBR:CENER) Not Flying Under The Radar

With a price-to-earnings (or "P/E") ratio of 20.7x Cenergy Holdings SA (EBR:CENER) may be sending very bearish signals at the moment, given that almost half of all companies in Belgium have P/E ratios under 13x and even P/E's lower than 8x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Cenergy Holdings certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Cenergy Holdings

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

Does Growth Match The High P/E?

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

Retrospectively, the last year delivered an exceptional 78% gain to the company's bottom line. Pleasingly, EPS has also lifted 140% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 38% over the next year. With the market only predicted to deliver 18%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Cenergy Holdings' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Cenergy Holdings' P/E

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.

We've established that Cenergy Holdings maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Cenergy Holdings is showing 4 warning signs in our investment analysis, and 2 of those are a bit concerning.

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.