Ekter SA's (ATH:EKTER) P/E Still Appears To Be Reasonable

With a price-to-earnings (or "P/E") ratio of 46.9x Ekter SA (ATH:EKTER) may be sending very bearish signals at the moment, given that almost half of all companies in Greece have P/E ratios under 12x and even P/E's lower than 6x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

For example, consider that Ekter's financial performance has been poor lately as it's earnings have been in decline. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

See our latest analysis for Ekter

Although there are no analyst estimates available for Ekter, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Growth For Ekter?

In order to justify its P/E ratio, Ekter would need to produce outstanding growth well in excess of the market.

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 64%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Weighing the recent medium-term upward earnings trajectory against the broader market's one-year forecast for contraction of 5.2% shows it's a great look while it lasts.

With this information, we can see why Ekter is trading at a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse. Nonetheless, with most other businesses facing an uphill battle, staying on its current earnings path is no certainty.

The Bottom Line On Ekter's P/E

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.

As we suspected, our examination of Ekter revealed its growing earnings over the medium-term are contributing to its high P/E, given the market is set to shrink. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader market turmoil. Although, if the company's relative performance doesn't change it will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Ekter that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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.