The Market Lifts Loulis Food Ingredients S.A. (ATH:KYLO) Shares 27% But It Can Do More

Loulis Food Ingredients S.A. (ATH:KYLO) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 42%.

In spite of the firm bounce in price, given about half the companies in Greece have price-to-earnings ratios (or "P/E's") above 13x, you may still consider Loulis Food Ingredients as an attractive investment with its 9.3x 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.

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Loulis Food Ingredients has been doing a good job lately as it's been growing earnings at a solid pace. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Check out our latest analysis for Loulis Food Ingredients

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Loulis Food Ingredients will help you shine a light on its historical performance.

How Is Loulis Food Ingredients' Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Loulis Food Ingredients' to be considered reasonable.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 14% last year. This was backed up an excellent period prior to see EPS up by 501% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 9.6% shows it's noticeably more attractive on an annualised basis.

With this information, we find it odd that Loulis Food Ingredients is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

The latest share price surge wasn't enough to lift Loulis Food Ingredients' P/E close to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Loulis Food Ingredients revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Loulis Food Ingredients.

If these risks are making you reconsider your opinion on Loulis Food Ingredients, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.