Some Taseko Mines Limited (TSE:TKO) Shareholders Look For Exit As Shares Take 27% Pounding

Taseko Mines Limited (TSE:TKO) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 33% share price drop.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Taseko Mines' P/E ratio of 10.9x, since the median price-to-earnings (or "P/E") ratio in Canada is also close to 11x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times have been advantageous for Taseko Mines as its earnings have been rising faster than most other companies. 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.

Check out our latest analysis for Taseko Mines

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Taseko Mines.

How Is Taseko Mines' Growth Trending?

The only time you'd be comfortable seeing a P/E like Taseko Mines' is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 239%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. 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 5.5% per annum during the coming three years according to the eight analysts following the company. Meanwhile, the broader market is forecast to expand by 13% each year, which paints a poor picture.

In light of this, it's somewhat alarming that Taseko Mines' P/E sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining earnings are likely to weigh on the share price eventually.

The Key Takeaway

Following Taseko Mines' share price tumble, its P/E is now hanging on to the median market P/E. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Taseko Mines currently trades on a higher than expected P/E for a company whose earnings are forecast to decline. Right now we are uncomfortable with the P/E as the predicted future earnings are unlikely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 3 warning signs for Taseko Mines that we have uncovered.

If you're unsure about the strength of Taseko Mines' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.