Investors Still Waiting For A Pull Back In BIO-UV Group S.A. (EPA:ALTUV)

With a price-to-earnings (or "P/E") ratio of 65.5x BIO-UV Group S.A. (EPA:ALTUV) may be sending very bearish signals at the moment, given that almost half of all companies in France have P/E ratios under 15x and even P/E's lower than 8x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

BIO-UV Group hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for BIO-UV Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on BIO-UV Group.

Is There Enough Growth For BIO-UV Group?

There's an inherent assumption that a company should far outperform the market for P/E ratios like BIO-UV Group's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 2.0% 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 1,052% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 566% over the next year. With the market only predicted to deliver 14%, the company is positioned for a stronger earnings result.

With this information, we can see why BIO-UV Group is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more 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 BIO-UV Group's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example - BIO-UV Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you're unsure about the strength of BIO-UV Group'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.