The Market Doesn't Like What It Sees From Titan Cement International S.A.'s (ATH:TITC) Earnings Yet

When close to half the companies in Greece have price-to-earnings ratios (or "P/E's") above 13x, you may consider Titan Cement International S.A. (ATH:TITC) as an attractive investment with its 7.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Titan Cement International 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Titan Cement International's 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 125% last year. The strong recent performance means it was also able to grow EPS by 256% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to slump, contracting by 44% during the coming year according to the four analysts following the company. Meanwhile, the broader market is forecast to expand by 13%, which paints a poor picture.

In light of this, it's understandable that Titan Cement International's P/E would sit below the majority of other companies. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Titan Cement International's 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.

We've established that Titan Cement International maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Titan Cement International is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Titan Cement International, 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.