Not Many Are Piling Into Dovre Group Plc (HEL:DOV1V) Just Yet

When close to half the companies in Finland have price-to-earnings ratios (or "P/E's") above 18x, you may consider Dovre Group Plc (HEL:DOV1V) as a highly attractive investment with its 8.3x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

With earnings that are retreating more than the market's of late, Dovre Group has been very sluggish. 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.

View our latest analysis for Dovre Group

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Is There Any Growth For Dovre Group?

The only time you'd be truly comfortable seeing a P/E as depressed as Dovre Group's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered a frustrating 22% 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 141% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 23% each year over the next three years. With the market only predicted to deliver 17% per year, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Dovre Group's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

We've established that Dovre Group currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It is also worth noting that we have found 2 warning signs for Dovre Group that you need to take into consideration.

You might be able to find a better investment than Dovre Group. 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.

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