Many Still Looking Away From RTL Group S.A. (ETR:RRTL)

RTL Group S.A.'s (ETR:RRTL) price-to-earnings (or "P/E") ratio of 13x 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 18x and even P/E's above 33x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

RTL 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.

See our latest analysis for RTL Group

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

Does Growth Match The Low P/E?

In order to justify its P/E ratio, RTL Group would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 36%. The last three years don't look nice either as the company has shrunk EPS by 29% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 14% per annum during the coming three years according to the six analysts following the company. With the market predicted to deliver 14% growth each year, the company is positioned for a comparable earnings result.

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

The Bottom Line On RTL Group'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.

Our examination of RTL Group's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with RTL Group (including 1 which is significant).

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.