Fewer Investors Than Expected Jumping On Carrefour SA (EPA:CA)

With a price-to-earnings (or "P/E") ratio of 9.3x Carrefour SA (EPA:CA) may be sending bullish signals at the moment, given that almost half of all companies in France have P/E ratios greater than 15x and even P/E's higher than 28x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Carrefour certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Carrefour

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

Is There Any Growth For Carrefour?

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

If we review the last year of earnings growth, the company posted a terrific increase of 32%. The latest three year period has also seen an excellent 244% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 9.6% each year during the coming three years according to the analysts following the company. With the market predicted to deliver 10% growth per annum, the company is positioned for a comparable earnings result.

With this information, we find it odd that Carrefour is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Carrefour's P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Carrefour's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Before you take the next step, you should know about the 2 warning signs for Carrefour that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.