Little Excitement Around Bucher Industries AG's (VTX:BUCN) Earnings

When close to half the companies in Switzerland have price-to-earnings ratios (or "P/E's") above 19x, you may consider Bucher Industries AG (VTX:BUCN) as an attractive investment with its 9.3x 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.

Bucher Industries 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Bucher Industries

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

Does Growth Match The Low P/E?

There's an inherent assumption that a company should underperform the market for P/E ratios like Bucher Industries' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 33%. The latest three year period has also seen an excellent 118% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the seven analysts covering the company suggest earnings growth is heading into negative territory, declining 9.2% per year over the next three years. Meanwhile, the broader market is forecast to expand by 8.6% per annum, which paints a poor picture.

With this information, we are not surprised that Bucher Industries is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Bucher Industries' P/E?

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Bucher Industries 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Bucher Industries you should know about.

Of course, you might also be able to find a better stock than Bucher Industries. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.