Market Might Still Lack Some Conviction On Mitre Realty Empreendimentos e Participações S.A. (BVMF:MTRE3) Even After 31% Share Price Boost

Mitre Realty Empreendimentos e Participações S.A. (BVMF:MTRE3) shareholders have had their patience rewarded with a 31% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 70%.

Although its price has surged higher, given about half the companies in Brazil have price-to-earnings ratios (or "P/E's") above 12x, you may still consider Mitre Realty Empreendimentos e Participações as an attractive investment with its 7.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been advantageous for Mitre Realty Empreendimentos e Participações 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.

See our latest analysis for Mitre Realty Empreendimentos e Participações

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Mitre Realty Empreendimentos e Participações.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Mitre Realty Empreendimentos e Participações would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 137% gain to the company's bottom line. Pleasingly, EPS has also lifted 122% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 29% during the coming year according to the two analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 21%, which is noticeably less attractive.

With this information, we find it odd that Mitre Realty Empreendimentos e Participações is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Mitre Realty Empreendimentos e Participações' P/E

Mitre Realty Empreendimentos e Participações' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Mitre Realty Empreendimentos e Participações' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Mitre Realty Empreendimentos e Participações (at least 3 which are a bit unpleasant), and understanding them should be part of your investment process.

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.