HBR Realty Empreendimentos Imobiliários S.A. (BVMF:HBRE3) Not Doing Enough For Some Investors As Its Shares Slump 31%

Unfortunately for some shareholders, the HBR Realty Empreendimentos Imobiliários S.A. (BVMF:HBRE3) share price has dived 31% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 48% share price drop.

Even after such a large drop in price, HBR Realty Empreendimentos Imobiliários' price-to-earnings (or "P/E") ratio of 3x might still make it look like a strong buy right now compared to the market in Brazil, where around half of the companies have P/E ratios above 9x and even P/E's above 13x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for HBR Realty Empreendimentos Imobiliários as its earnings have been rising faster than most other companies. It might be that many expect the strong 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.

Check out our latest analysis for HBR Realty Empreendimentos Imobiliários

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

There's an inherent assumption that a company should far underperform the market for P/E ratios like HBR Realty Empreendimentos Imobiliários' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 87%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to slump, contracting by 136% during the coming year according to the dual analysts following the company. That's not great when the rest of the market is expected to grow by 17%.

In light of this, it's understandable that HBR Realty Empreendimentos Imobiliários' P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On HBR Realty Empreendimentos Imobiliários' P/E

Shares in HBR Realty Empreendimentos Imobiliários have plummeted and its P/E is now low enough to touch the ground. 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 HBR Realty Empreendimentos Imobiliários maintains its low P/E on the weakness of its forecast for sliding earnings, 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.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for HBR Realty Empreendimentos Imobiliários (2 are a bit concerning) you should be aware of.

If these risks are making you reconsider your opinion on HBR Realty Empreendimentos Imobiliários, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.