Stock Analysis

Motor Oil (Hellas) Corinth Refineries S.A.'s (ATH:MOH) Earnings Are Not Doing Enough For Some Investors

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When close to half the companies in Greece have price-to-earnings ratios (or "P/E's") above 12x, you may consider Motor Oil (Hellas) Corinth Refineries S.A. (ATH:MOH) as a highly attractive investment with its 3.7x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

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 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.

View our latest analysis for Motor Oil (Hellas) Corinth Refineries

ATSE:MOH Price to Earnings Ratio vs Industry April 25th 2024
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How Is Motor Oil (Hellas) Corinth Refineries' Growth Trending?

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.

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 16%. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to slump, contracting by 15% per year during the coming three years according to the six analysts following the company. That's not great when the rest of the market is expected to grow by 8.1% each year.

With this information, we are not surprised that Motor Oil (Hellas) Corinth Refineries 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 Bottom Line On Motor Oil (Hellas) Corinth Refineries' P/E

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.

As we suspected, our examination of Motor Oil (Hellas) Corinth Refineries' 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.

You need to take note of risks, for example - Motor Oil (Hellas) Corinth Refineries has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

If these risks are making you reconsider your opinion on Motor Oil (Hellas) Corinth Refineries, explore our interactive list of high quality stocks to get an idea of what else is out there.

Valuation is complex, but we're helping make it simple.

Find out whether Motor Oil (Hellas) Corinth Refineries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.