Market Participants Recognise Empresa Nacional de Telecomunicaciones S.A.'s (SNSE:ENTEL) Earnings

With a price-to-earnings (or "P/E") ratio of 16.9x Empresa Nacional de Telecomunicaciones S.A. (SNSE:ENTEL) may be sending bearish signals at the moment, given that almost half of all companies in Chile have P/E ratios under 14x and even P/E's lower than 10x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Recent times haven't been advantageous for Empresa Nacional de Telecomunicaciones as its earnings have been falling quicker than most other companies. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Empresa Nacional de Telecomunicaciones

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

Is There Enough Growth For Empresa Nacional de Telecomunicaciones?

The only time you'd be truly comfortable seeing a P/E as high as Empresa Nacional de Telecomunicaciones' is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered a frustrating 45% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 95% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 30% each year during the coming three years according to the seven analysts following the company. With the market only predicted to deliver 14% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Empresa Nacional de Telecomunicaciones is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Empresa Nacional de Telecomunicaciones' 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.

As we suspected, our examination of Empresa Nacional de Telecomunicaciones' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 4 warning signs for Empresa Nacional de Telecomunicaciones (1 shouldn't be ignored!) that we have uncovered.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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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