Market Cool On Ilyda SA's (ATH:ILYDA) Earnings

There wouldn't be many who think Ilyda SA's (ATH:ILYDA) price-to-earnings (or "P/E") ratio of 12x is worth a mention when the median P/E in Greece is similar at about 12x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Ilyda certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. 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 not quite in favour.

Check out our latest analysis for Ilyda

Although there are no analyst estimates available for Ilyda, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Ilyda's Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Ilyda's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 116%. The strong recent performance means it was also able to grow EPS by 106% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 9.2% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that Ilyda is trading at a fairly similar P/E to the market. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

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.

We've established that Ilyda currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 4 warning signs for Ilyda you should be aware of.

Of course, you might also be able to find a better stock than Ilyda. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.