There's No Escaping HBR Realty Empreendimentos Imobiliários S.A.'s (BVMF:HBRE3) Muted Earnings Despite A 27% Share Price Rise

HBR Realty Empreendimentos Imobiliários S.A. (BVMF:HBRE3) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, given about half the companies in Brazil have price-to-earnings ratios (or "P/E's") above 10x, you may still consider HBR Realty Empreendimentos Imobiliários as an attractive investment with its 5.2x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

HBR Realty Empreendimentos Imobiliários certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive 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 out of favour.

See our latest analysis for HBR Realty Empreendimentos Imobiliários

Want the full picture on analyst estimates for the company? Then our free report on HBR Realty Empreendimentos Imobiliários will help you uncover what's on the horizon.

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

HBR Realty Empreendimentos Imobiliários' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 75% 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.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 109% as estimated by the one analyst watching the company. Meanwhile, the broader market is forecast to expand by 20%, which paints a poor picture.

With this information, we are not surprised that HBR Realty Empreendimentos Imobiliários is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

What We Can Learn From HBR Realty Empreendimentos Imobiliários' P/E?

The latest share price surge wasn't enough to lift HBR Realty Empreendimentos Imobiliários' P/E close to the market median. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

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. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for HBR Realty Empreendimentos Imobiliários (2 are a bit concerning) you should be aware 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).

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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.

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