Investors Interested In CPI Computer Peripherals International's (ATH:CPI) Earnings

With a price-to-earnings (or "P/E") ratio of 26.9x CPI Computer Peripherals International (ATH:CPI) may be sending very bearish signals at the moment, given that almost half of all companies in Greece have P/E ratios under 10x and even P/E's lower than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

With earnings growth that's exceedingly strong of late, CPI Computer Peripherals International has been doing very well. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for CPI Computer Peripherals International

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How Is CPI Computer Peripherals International's Growth Trending?

CPI Computer Peripherals International's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered an exceptional 147% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that to the market, which is predicted to shrink 14% in the next 12 months, the company's positive momentum based on recent medium-term earnings results is a bright spot for the moment.

In light of this, it's understandable that CPI Computer Peripherals International's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse. Nonetheless, with most other businesses facing an uphill battle, staying on its current earnings path is no certainty.

The Bottom Line On CPI Computer Peripherals International's P/E

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.

As we suspected, our examination of CPI Computer Peripherals International revealed its growing earnings over the medium-term are contributing to its high P/E, given the market is set to shrink. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Our only concern is whether its earnings trajectory can keep outperforming under these tough market conditions. Although, if the company's relative performance doesn't change it will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for CPI Computer Peripherals International (2 are concerning) you should be aware of.

You might be able to find a better investment than CPI Computer Peripherals International. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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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.