There's No Escaping Per Aarsleff Holding A/S' (CPH:PAAL B) Muted Earnings

When close to half the companies in Denmark have price-to-earnings ratios (or "P/E's") above 16x, you may consider Per Aarsleff Holding A/S (CPH:PAAL B) as an attractive investment with its 8.9x 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 limited.

Per Aarsleff Holding's earnings growth of late has been pretty similar to most other companies. One possibility is that the P/E is low because investors think this modest earnings performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

See our latest analysis for Per Aarsleff Holding

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Is There Any Growth For Per Aarsleff Holding?

Per Aarsleff Holding'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 terrific increase of 17%. Pleasingly, EPS has also lifted 106% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 2.2% as estimated by the two analysts watching the company. With the market predicted to deliver 19% growth , the company is positioned for a weaker earnings result.

With this information, we can see why Per Aarsleff Holding is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Per Aarsleff Holding'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.

As we suspected, our examination of Per Aarsleff Holding's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. 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.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Per Aarsleff Holding with six simple checks will allow you to discover any risks that could be an issue.

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.