Distribuidora Internacional de Alimentación, S.A.'s (BME:DIA) 26% Jump Shows Its Popularity With Investors

Distribuidora Internacional de Alimentación, S.A. (BME:DIA) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 77% in the last year.

Following the firm bounce in price, Distribuidora Internacional de Alimentación may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 46.5x, since almost half of all companies in Spain have P/E ratios under 18x and even P/E's lower than 11x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Distribuidora Internacional de Alimentación hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Distribuidora Internacional de Alimentación

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Distribuidora Internacional de Alimentación.

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, Distribuidora Internacional de Alimentación would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 68% decrease to the company's bottom line. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 69% per annum during the coming three years according to the three analysts following the company. With the market only predicted to deliver 11% per annum, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Distribuidora Internacional de Alimentación's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Distribuidora Internacional de Alimentación's P/E?

Distribuidora Internacional de Alimentación's P/E is flying high just like its stock has during the last month. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Distribuidora Internacional de Alimentación maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 5 warning signs for Distribuidora Internacional de Alimentación you should be aware of, and 3 of them are a bit unpleasant.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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