Investors Still Aren't Entirely Convinced About Positivo Tecnologia S.A.'s (BVMF:POSI3) Earnings Despite 27% Price Jump

Positivo Tecnologia S.A. (BVMF:POSI3) shares have had a really impressive month, gaining 27% after a shaky period beforehand. But not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 29% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Positivo Tecnologia's price-to-earnings (or "P/E") ratio of 13.5x right now seems quite "middle-of-the-road" compared to the market in Brazil, where the median P/E ratio is around 15x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With earnings growth that's superior to most other companies of late, Positivo Tecnologia has been doing relatively well. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Positivo Tecnologia

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

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

There's an inherent assumption that a company should be matching the market for P/E ratios like Positivo Tecnologia's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 238%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 75% over the next year. Meanwhile, the rest of the market is forecast to only expand by 22%, which is noticeably less attractive.

In light of this, it's curious that Positivo Tecnologia's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Positivo Tecnologia's P/E

Positivo Tecnologia's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

Our examination of Positivo Tecnologia's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E 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 pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Positivo Tecnologia (3 are a bit concerning!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Positivo Tecnologia, 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. 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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