Aena S.M.E., S.A.'s (BME:AENA) Share Price Is Matching Sentiment Around Its Earnings

When close to half the companies in Spain have price-to-earnings ratios (or "P/E's") above 20x, you may consider Aena S.M.E., S.A. (BME:AENA) as an attractive investment with its 15.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Aena S.M.E certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Aena S.M.E

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Aena S.M.E.

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

The only time you'd be truly comfortable seeing a P/E as low as Aena S.M.E's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 41% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to climb by 4.5% per annum during the coming three years according to the analysts following the company. With the market predicted to deliver 11% growth each year, the company is positioned for a weaker earnings result.

With this information, we can see why Aena S.M.E 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 Aena S.M.E's P/E

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 Aena S.M.E maintains its low P/E on the weakness of its forecast growth being lower than the wider market, 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Aena S.M.E that you should be aware of.

Of course, you might also be able to find a better stock than Aena S.M.E. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.