A Piece Of The Puzzle Missing From DWS Group GmbH & Co. KGaA's (ETR:DWS) Share Price

When close to half the companies in Germany have price-to-earnings ratios (or "P/E's") above 17x, you may consider DWS Group GmbH & Co. KGaA (ETR:DWS) as an attractive investment with its 13.4x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for DWS Group GmbH KGaA as its earnings have been rising faster 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 you 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.

Check out our latest analysis for DWS Group GmbH KGaA

Keen to find out how analysts think DWS Group GmbH KGaA's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For DWS Group GmbH KGaA?

DWS Group GmbH KGaA'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.

If we review the last year of earnings growth, the company posted a worthy increase of 8.2%. Ultimately though, it couldn't turn around the poor performance of the prior period, with EPS shrinking 12% 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 15% per year during the coming three years according to the ten analysts following the company. That's shaping up to be similar to the 15% per annum growth forecast for the broader market.

In light of this, it's peculiar that DWS Group GmbH KGaA's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From DWS Group GmbH KGaA's P/E?

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 DWS Group GmbH KGaA currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

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

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.