Stock Analysis

Market Cool On Credit Suisse Group AG's (VTX:CSGN) Earnings

  •  Updated
SWX:CSGN
Source: Shutterstock

Credit Suisse Group AG's (VTX:CSGN) price-to-earnings (or "P/E") ratio of 21x might make it look like a buy right now compared to the market in Switzerland, where around half of the companies have P/E ratios above 24x and even P/E's above 43x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Credit Suisse Group hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Credit Suisse Group

pe
SWX:CSGN Price Based on Past Earnings July 27th 2021
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Credit Suisse Group.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Credit Suisse Group's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 72% decrease to the company's bottom line. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 49% each year as estimated by the analysts watching the company. That's shaping up to be materially higher than the 16% per annum growth forecast for the broader market.

In light of this, it's peculiar that Credit Suisse Group's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Credit Suisse Group'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 Credit Suisse Group's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 5 warning signs for Credit Suisse Group you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course, you might also be able to find a better stock than Credit Suisse Group. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.

When trading Credit Suisse Group or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Credit Suisse Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis