Earnings Working Against Motor Oil (Hellas) Corinth Refineries S.A.'s (ATH:MOH) Share Price

Motor Oil (Hellas) Corinth Refineries S.A.'s (ATH:MOH) price-to-earnings (or "P/E") ratio of 3.1x might make it look like a strong buy right now compared to the market in Greece, where around half of the companies have P/E ratios above 12x and even P/E's above 21x 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.

Motor Oil (Hellas) Corinth Refineries hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Motor Oil (Hellas) Corinth Refineries

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Motor Oil (Hellas) Corinth Refineries.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Motor Oil (Hellas) Corinth Refineries would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 24%. Even so, admirably EPS has lifted 1,480% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to slump, contracting by 23% each year during the coming three years according to the seven analysts following the company. With the market predicted to deliver 5.8% growth per annum, that's a disappointing outcome.

With this information, we are not surprised that Motor Oil (Hellas) Corinth Refineries is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

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 Motor Oil (Hellas) Corinth Refineries maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. 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.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Motor Oil (Hellas) Corinth Refineries (2 shouldn't be ignored!) that you need to be mindful of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.