Investors Appear Satisfied With Prosegur Compañía de Seguridad, S.A.'s (BME:PSG) Prospects As Shares Rocket 31%

Despite an already strong run, Prosegur Compañía de Seguridad, S.A. (BME:PSG) shares have been powering on, with a gain of 31% in the last thirty days. The last 30 days bring the annual gain to a very sharp 56%.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Prosegur Compañía de Seguridad's P/E ratio of 17.8x, since the median price-to-earnings (or "P/E") ratio in Spain is also close to 19x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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With earnings growth that's superior to most other companies of late, Prosegur Compañía de Seguridad has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

See our latest analysis for Prosegur Compañía de Seguridad

Keen to find out how analysts think Prosegur Compañía de Seguridad's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Growth For Prosegur Compañía de Seguridad?

In order to justify its P/E ratio, Prosegur Compañía de Seguridad would need to produce growth that's similar to the market.

Retrospectively, the last year delivered an exceptional 19% gain to the company's bottom line. The latest three year period has also seen an excellent 93% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 12% per annum over the next three years. Meanwhile, the rest of the market is forecast to expand by 13% per year, which is not materially different.

With this information, we can see why Prosegur Compañía de Seguridad is trading at a fairly similar P/E to the market. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Prosegur Compañía de Seguridad's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

As we suspected, our examination of Prosegur Compañía de Seguridad's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Before you take the next step, you should know about the 2 warning signs for Prosegur Compañía de Seguridad (1 doesn't sit too well with us!) that we have uncovered.

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.