Investors Aren't Entirely Convinced By Aegean Airlines S.A.'s (ATH:AEGN) Earnings

Aegean Airlines S.A.'s (ATH:AEGN) price-to-earnings (or "P/E") ratio of 7.8x might make it look like a buy right now compared to the market in Greece, where around half of the companies have P/E ratios above 13x and even P/E's above 21x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Aegean Airlines could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Aegean Airlines

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Is There Any Growth For Aegean Airlines?

In order to justify its P/E ratio, Aegean Airlines would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 23%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 2,315% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 3.2% per annum as estimated by the five analysts watching the company. With the market predicted to deliver 4.7% growth each year, the company is positioned for a comparable earnings result.

With this information, we find it odd that Aegean Airlines is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Aegean Airlines' P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Aegean Airlines' analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like 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.

Having said that, be aware Aegean Airlines is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Aegean Airlines, 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.