Investors Holding Back On Hellenic Telecommunications Organization S.A. (ATH:HTO)

There wouldn't be many who think Hellenic Telecommunications Organization S.A.'s (ATH:HTO) price-to-earnings (or "P/E") ratio of 11x is worth a mention when the median P/E in Greece is similar at about 11x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Recent times have been advantageous for Hellenic Telecommunications Organization as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Hellenic Telecommunications Organization's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered an exceptional 41% gain to the company's bottom line. The latest three year period has also seen an excellent 201% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 7.4% per year during the coming three years according to the nine analysts following the company. With the market only predicted to deliver 4.2% each year, 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. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

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.

We've established that Hellenic Telecommunications Organization currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook 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, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Hellenic Telecommunications Organization with six simple checks.

Of course, you might also be able to find a better stock than Hellenic Telecommunications Organization. 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.