Benign Growth For Aena S.M.E., S.A. (BME:AENA) Underpins Its Share Price

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 14.3x 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.

Recent times have been advantageous for Aena S.M.E as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 out of favour.

View our latest analysis for Aena S.M.E

Keen to find out how analysts think Aena S.M.E's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Aena S.M.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.

Retrospectively, the last year delivered an exceptional 49% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should generate growth of 5.7% each year as estimated by the analysts watching the company. That's shaping up to be materially lower than the 15% each year growth forecast for the broader market.

In light of this, it's understandable that Aena S.M.E's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Aena S.M.E's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

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.

You might be able to find a better investment than Aena S.M.E. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.