MPH Health Care AG (FRA:93M1) Held Back By Insufficient Growth Even After Shares Climb 28%

Those holding MPH Health Care AG (FRA:93M1) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last 30 days bring the annual gain to a very sharp 52%.

Although its price has surged higher, given about half the companies in Germany have price-to-earnings ratios (or "P/E's") above 17x, you may still consider MPH Health Care as a highly attractive investment with its 3.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

With earnings growth that's inferior to most other companies of late, MPH Health Care has been relatively sluggish. It seems that many are expecting the uninspiring earnings performance to persist, which has repressed the P/E. If you still like the company, you'd be hoping earnings don't get any worse and that you could pick up some stock while it's out of favour.

See our latest analysis for MPH Health Care

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MPH Health Care.

Is There Any Growth For MPH Health Care?

The only time you'd be truly comfortable seeing a P/E as depressed as MPH Health Care's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered virtually the same number to the company's bottom line as the year before. Likewise, not much has changed from three years ago as earnings have been stuck during that whole time. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.

Looking ahead now, EPS is anticipated to slump, contracting by 89% during the coming year according to the lone analyst following the company. That's not great when the rest of the market is expected to grow by 17%.

In light of this, it's understandable that MPH Health Care'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 Bottom Line On MPH Health Care's P/E

MPH Health Care's recent share price jump still sees its P/E sitting firmly flat on the ground. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that MPH Health Care maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware MPH Health Care is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on MPH Health Care, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.