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This article is written for those who want to get better at using price to earnings ratios (P/E ratios). To keep it practical, we’ll show how ANY Biztonsági Nyomda Nyrt.’s (BUSE:ANY) P/E ratio could help you assess the value on offer. ANY Biztonsági Nyomda Nyrt has a P/E ratio of 16.98, based on the last twelve months. That is equivalent to an earnings yield of about 5.9%.
How Do You Calculate ANY Biztonsági Nyomda Nyrt’s P/E Ratio?
The formula for price to earnings is:
Price to Earnings Ratio = Price per Share ÷ Earnings per Share (EPS)
Or for ANY Biztonsági Nyomda Nyrt:
P/E of 16.98 = HUF1345 ÷ HUF79.23 (Based on the year to March 2019.)
Is A High Price-to-Earnings Ratio Good?
A higher P/E ratio implies that investors pay a higher price for the earning power of the business. That is not a good or a bad thing per se, but a high P/E does imply buyers are optimistic about the future.
How Growth Rates Impact P/E Ratios
If earnings fall then in the future the ‘E’ will be lower. Therefore, even if you pay a low multiple of earnings now, that multiple will become higher in the future. So while a stock may look cheap based on past earnings, it could be expensive based on future earnings.
ANY Biztonsági Nyomda Nyrt shrunk earnings per share by 3.3% last year. But EPS is up 5.2% over the last 5 years. And EPS is down 6.0% a year, over the last 3 years. So you wouldn’t expect a very high P/E.
Does ANY Biztonsági Nyomda Nyrt Have A Relatively High Or Low P/E For Its Industry?
One good way to get a quick read on what market participants expect of a company is to look at its P/E ratio. The image below shows that ANY Biztonsági Nyomda Nyrt has a P/E ratio that is roughly in line with the commercial services industry average (15.9).
ANY Biztonsági Nyomda Nyrt’s P/E tells us that market participants think its prospects are roughly in line with its industry. If the company has better than average prospects, then the market might be underestimating it. Checking factors such as the tenure of the board and management could help you form your own view on if that will happen.
A Limitation: P/E Ratios Ignore Debt and Cash In The Bank
The ‘Price’ in P/E reflects the market capitalization of the company. In other words, it does not consider any debt or cash that the company may have on the balance sheet. Hypothetically, a company could reduce its future P/E ratio by spending its cash (or taking on debt) to achieve higher earnings.
While growth expenditure doesn’t always pay off, the point is that it is a good option to have; but one that the P/E ratio ignores.
Is Debt Impacting ANY Biztonsági Nyomda Nyrt’s P/E?
Net debt is 32% of ANY Biztonsági Nyomda Nyrt’s market cap. You’d want to be aware of this fact, but it doesn’t bother us.
The Verdict On ANY Biztonsági Nyomda Nyrt’s P/E Ratio
ANY Biztonsági Nyomda Nyrt’s P/E is 17 which is above average (11.7) in the HU market. With some debt but no EPS growth last year, the market has high expectations of future profits.
Investors have an opportunity when market expectations about a stock are wrong. As value investor Benjamin Graham famously said, ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’ So this free report on the analyst consensus forecasts could help you make a master move on this stock.
Of course you might be able to find a better stock than ANY Biztonsági Nyomda Nyrt. So you may wish to see this free collection of other companies that have grown earnings strongly.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.