Investors Holding Back On Teleperformance SE (EPA:TEP)

When close to half the companies in France have price-to-earnings ratios (or "P/E's") above 17x, you may consider Teleperformance SE (EPA:TEP) as a highly attractive investment with its 7.3x 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.

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Teleperformance has been struggling lately as its earnings have declined faster than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. 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 Teleperformance

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

How Is Teleperformance's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 21% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 16% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 16% each year over the next three years. That's shaping up to be materially higher than the 13% per year growth forecast for the broader market.

In light of this, it's peculiar that Teleperformance'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

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 Teleperformance's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Teleperformance you should know about.

Of course, you might also be able to find a better stock than Teleperformance. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.