Metso Oyj's (HEL:METSO) P/E Is On The Mark

Explore Metso Oyj's Fair Values from the Community and select yours

There wouldn't be many who think Metso Oyj's (HEL:METSO) price-to-earnings (or "P/E") ratio of 20.2x is worth a mention when the median P/E in Finland is similar at about 20x. 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 that are retreating more than the market's of late, Metso Oyj has been very sluggish. It might be that many expect the dismal earnings performance to revert back to market averages soon, which has kept the P/E from falling. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders may be a little nervous about the viability of the share price.

Check out our latest analysis for Metso Oyj

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Metso Oyj.

How Is Metso Oyj's Growth Trending?

The only time you'd be comfortable seeing a P/E like Metso Oyj's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered a frustrating 12% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 92% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Looking ahead now, EPS is anticipated to climb by 15% each year during the coming three years according to the analysts following the company. With the market predicted to deliver 15% growth per annum, the company is positioned for a comparable earnings result.

In light of this, it's understandable that Metso Oyj's P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Metso Oyj's P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Metso Oyj'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. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Metso Oyj, and understanding them should be part of your investment process.

If you're unsure about the strength of Metso Oyj'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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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.