Slammed 31% OPG Power Ventures Plc (LON:OPG) Screens Well Here But There Might Be A Catch

The OPG Power Ventures Plc (LON:OPG) share price has fared very poorly over the last month, falling by a substantial 31%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

Following the heavy fall in price, OPG Power Ventures' price-to-earnings (or "P/E") ratio of 6.4x might make it look like a strong buy right now compared to the market in the United Kingdom, where around half of the companies have P/E ratios above 17x and even P/E's above 28x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

OPG Power Ventures hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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 OPG Power Ventures

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

How Is OPG Power Ventures' Growth Trending?

In order to justify its P/E ratio, OPG Power Ventures would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a frustrating 43% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 69% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 18% during the coming year according to the lone analyst following the company. With the market predicted to deliver 19% growth , the company is positioned for a comparable earnings result.

With this information, we find it odd that OPG Power Ventures is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On OPG Power Ventures' P/E

Shares in OPG Power Ventures have plummeted and its P/E is now low enough to touch the ground. 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.

We've established that OPG Power Ventures currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. 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. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you settle on your opinion, we've discovered 4 warning signs for OPG Power Ventures (1 is a bit unpleasant!) that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.