There's No Escaping Visiativ SA's (EPA:ALVIV) Muted Earnings Despite A 32% Share Price Rise

Despite an already strong run, Visiativ SA (EPA:ALVIV) shares have been powering on, with a gain of 32% in the last thirty days. Notwithstanding the latest gain, the annual share price return of 5.0% isn't as impressive.

In spite of the firm bounce in price, Visiativ's price-to-earnings (or "P/E") ratio of 12.2x might still make it look like a buy right now compared to the market in France, where around half of the companies have P/E ratios above 15x and even P/E's above 26x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Visiativ certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

View our latest analysis for Visiativ

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

Is There Any Growth For Visiativ?

In order to justify its P/E ratio, Visiativ 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 33%. The strong recent performance means it was also able to grow EPS by 537% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 0.2% per year as estimated by the three analysts watching the company. With the market predicted to deliver 13% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Visiativ's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Visiativ's P/E

The latest share price surge wasn't enough to lift Visiativ's P/E close to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Visiativ maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 6 warning signs for Visiativ (2 are a bit unpleasant!) that you need to take into consideration.

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