Eutelsat Group's (EPA:ETL) 26% Price Boost Is Out Of Tune With Earnings

Eutelsat Group (EPA:ETL) shareholders have had their patience rewarded with a 26% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 21% over that time.

Following the firm bounce in price, given close to half the companies in France have price-to-earnings ratios (or "P/E's") below 15x, you may consider Eutelsat Group as a stock to avoid entirely with its 32.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times haven't been advantageous for Eutelsat Group as its earnings have been falling quicker than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Eutelsat Group

Want the full picture on analyst estimates for the company? Then our free report on Eutelsat Group will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The High P/E?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 52%. This means it has also seen a slide in earnings over the longer-term as EPS is down 88% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

What We Can Learn From Eutelsat Group's P/E?

The strong share price surge has got Eutelsat Group's P/E rushing to great heights as well. 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.

It is also worth noting that we have found 5 warning signs for Eutelsat Group (2 can't be ignored!) that you need to take into consideration.

You might be able to find a better investment than Eutelsat 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com