Earnings Working Against Bertrandt Aktiengesellschaft's (ETR:BDT) Share Price Following 25% Dive

Unfortunately for some shareholders, the Bertrandt Aktiengesellschaft (ETR:BDT) share price has dived 25% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 66% loss during that time.

Following the heavy fall in price, Bertrandt's price-to-earnings (or "P/E") ratio of 9.5x might make it look like a buy right now compared to the market in Germany, where around half of the companies have P/E ratios above 16x and even P/E's above 29x 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.

Bertrandt hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Bertrandt

Want the full picture on analyst estimates for the company? Then our free report on Bertrandt will help you uncover what's on the horizon.

How Is Bertrandt's Growth Trending?

Bertrandt's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than 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 39%. 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.

Shifting to the future, estimates from the four analysts covering the company suggest earnings growth is heading into negative territory, declining 50% over the next year. With the market predicted to deliver 23% growth , that's a disappointing outcome.

In light of this, it's understandable that Bertrandt's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Key Takeaway

The softening of Bertrandt's shares means its P/E is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Bertrandt maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Bertrandt you should be aware of.

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

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.