Tander Inversiones SOCIMI, S.A.'s (BME:YTAN) Business Is Yet to Catch Up With Its Share Price

By
Simply Wall St
Published
May 19, 2021
BME:YTAN
Source: Shutterstock

When close to half the companies in Spain have price-to-earnings ratios (or "P/E's") below 23x, you may consider Tander Inversiones SOCIMI, S.A. (BME:YTAN) as a stock to avoid entirely with its 49x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

For instance, Tander Inversiones SOCIMI's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Tander Inversiones SOCIMI

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BME:YTAN Price Based on Past Earnings May 20th 2021
Although there are no analyst estimates available for Tander Inversiones SOCIMI, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Does Growth Match The High P/E?

Tander Inversiones SOCIMI's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 54%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 6.9% overall rise in EPS. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 17% shows it's noticeably less attractive on an annualised basis.

With this information, we find it concerning that Tander Inversiones SOCIMI is trading at a P/E higher than the market. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

What We Can Learn From Tander Inversiones SOCIMI's P/E?

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 Tander Inversiones SOCIMI currently trades on a much higher than expected P/E since its recent three-year growth is lower than the wider market forecast. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Plus, you should also learn about these 3 warning signs we've spotted with Tander Inversiones SOCIMI (including 2 which are a bit concerning).

If you're unsure about the strength of Tander Inversiones SOCIMI's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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