Valmet Oyj (HEL:VALMT) Doing What It Can To Lift Shares

When close to half the companies in Finland have price-to-earnings ratios (or "P/E's") above 18x, you may consider Valmet Oyj (HEL:VALMT) as an attractive investment with its 15.8x 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.

Recent times haven't been advantageous for Valmet Oyj as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Valmet Oyj

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

How Is Valmet Oyj's Growth Trending?

In order to justify its P/E ratio, Valmet Oyj would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 24%. As a result, earnings from three years ago have also fallen 22% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 14% per annum during the coming three years according to the seven analysts following the company. That's shaping up to be similar to the 14% per annum growth forecast for the broader market.

With this information, we find it odd that Valmet Oyj is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Valmet Oyj's P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Valmet Oyj's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Valmet Oyj that you should be aware of.

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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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.