UCB SA's (EBR:UCB) Share Price Is Still Matching Investor Opinion Despite 25% Slump

UCB SA (EBR:UCB) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 15%.

Although its price has dipped substantially, given close to half the companies in Belgium have price-to-earnings ratios (or "P/E's") below 14x, you may still consider UCB as a stock to avoid entirely with its 24.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Our free stock report includes 2 warning signs investors should be aware of before investing in UCB. Read for free now.

UCB certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for UCB

Keen to find out how analysts think UCB's future stacks up against the industry? In that case, our free report is a great place to start.

How Is UCB's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as UCB's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 210% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 22% per annum over the next three years. Meanwhile, the rest of the market is forecast to only expand by 15% per year, which is noticeably less attractive.

In light of this, it's understandable that UCB's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On UCB's P/E

A significant share price dive has done very little to deflate UCB's very lofty 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.

As we suspected, our examination of UCB's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for UCB that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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.