MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság's (BUSE:MOL) Price Is Right But Growth Is Lacking

When close to half the companies in Hungary have price-to-earnings ratios (or "P/E's") above 12x, you may consider MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság (BUSE:MOL) as a highly attractive investment with its 3.9x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság 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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság

Want the full picture on analyst estimates for the company? Then our free report on MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság will help you uncover what's on the horizon.

Is There Any Growth For MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság?

In order to justify its P/E ratio, MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 18%. Still, the latest three year period has seen an excellent 313% overall rise in EPS, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the five analysts covering the company suggest earnings growth is heading into negative territory, declining 7.5% per year over the next three years. With the market predicted to deliver 15% growth each year, that's a disappointing outcome.

With this information, we are not surprised that MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Bottom Line On MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság's P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság (1 is concerning!) that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com