M.T.I Wireless Edge Ltd.'s (LON:MWE) Price Is Right But Growth Is Lacking

M.T.I Wireless Edge Ltd.'s (LON:MWE) price-to-earnings (or "P/E") ratio of 9.8x might make it look like a buy right now compared to the market in the United Kingdom, where around half of the companies have P/E ratios above 15x and even P/E's above 28x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been pleasing for M.T.I Wireless Edge as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

Check out our latest analysis for M.T.I Wireless Edge

If you'd like to see what analysts are forecasting going forward, you should check out our free report on M.T.I Wireless Edge.

How Is M.T.I Wireless Edge's Growth Trending?

M.T.I Wireless Edge's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a decent 8.9% gain to the company's bottom line. The latest three year period has also seen a 26% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 1.3% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the market is forecast to expand by 13%, which is noticeably more attractive.

With this information, we can see why M.T.I Wireless Edge is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of M.T.I Wireless Edge's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware M.T.I Wireless Edge is showing 2 warning signs in our investment analysis, you should know about.

You might be able to find a better investment than M.T.I Wireless Edge. 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.