Organization of Football Prognostics S.A.'s (ATH:OPAP) Share Price Is Matching Sentiment Around Its Earnings

When close to half the companies in Greece have price-to-earnings ratios (or "P/E's") above 13x, you may consider Organization of Football Prognostics S.A. (ATH:OPAP) as an attractive investment with its 10x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Organization of Football Prognostics 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.

See our latest analysis for Organization of Football Prognostics

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

Is There Any Growth For Organization of Football Prognostics?

The only time you'd be truly comfortable seeing a P/E as low as Organization of Football Prognostics' is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 62% last year. Pleasingly, EPS has also lifted 309% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the six analysts covering the company suggest earnings growth is heading into negative territory, declining 25% over the next year. That's not great when the rest of the market is expected to grow by 14%.

With this information, we are not surprised that Organization of Football Prognostics is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Organization of Football Prognostics' analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Organization of Football Prognostics (of which 2 don't sit too well with us!) you should know about.

If you're unsure about the strength of Organization of Football Prognostics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.