Autoneum Holding AG's (VTX:AUTN) Subdued P/E Might Signal An Opportunity

There wouldn't be many who think Autoneum Holding AG's (VTX:AUTN) price-to-earnings (or "P/E") ratio of 21x is worth a mention when the median P/E in Switzerland is similar at about 21x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Autoneum Holding hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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Is There Some Growth For Autoneum Holding?

Autoneum Holding's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 58%. This means it has also seen a slide in earnings over the longer-term as EPS is down 52% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 33% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 13% each year, which is noticeably less attractive.

In light of this, it's curious that Autoneum Holding'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 Autoneum Holding's P/E

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 Autoneum Holding'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. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Autoneum Holding (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

You might be able to find a better investment than Autoneum Holding. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.