The Price Is Right For 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 10.9x is worth a mention when the median P/E in Greece is similar at about 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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 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.

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.

Does Growth Match The P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 45% last year. The strong recent performance means it was also able to grow EPS by 93% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 3.4% per annum as estimated by the nine analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 5.4% per annum, which is not materially different.

With this information, we can see why Hellenic Telecommunications Organization is trading at a fairly similar P/E to the market. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

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 maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. Unless these conditions change, they will continue to support the share price at these levels.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Hellenic Telecommunications Organization with six simple checks will allow you to discover any risks that could be an issue.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.