Hellenic Telecommunications Organization S.A. (ATH:HTO) Screens Well But There Might Be A Catch

It's not a stretch to say that Hellenic Telecommunications Organization S.A.'s (ATH:HTO) price-to-earnings (or "P/E") ratio of 13.7x right now seems quite "middle-of-the-road" compared to the market in Greece, where the median P/E ratio is around 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.

While the market has experienced earnings growth lately, Hellenic Telecommunications Organization's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for Hellenic Telecommunications Organization

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Hellenic Telecommunications Organization.

How Is Hellenic Telecommunications Organization's Growth Trending?

In order to justify its P/E ratio, Hellenic Telecommunications Organization would need to produce growth that's similar to the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 30%. This means it has also seen a slide in earnings over the longer-term as EPS is down 3.6% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 42% during the coming year according to the six analysts following the company. With the market only predicted to deliver 11%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that Hellenic Telecommunications Organization is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Hellenic Telecommunications Organization's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Hellenic Telecommunications Organization you should know about.

If these risks are making you reconsider your opinion on Hellenic Telecommunications Organization, 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.