Earnings Not Telling The Story For Industrie De Nora S.p.A. (BIT:DNR)

There wouldn't be many who think Industrie De Nora S.p.A.'s (BIT:DNR) price-to-earnings (or "P/E") ratio of 16.1x is worth a mention when the median P/E in Italy is similar at about 16x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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While the market has experienced earnings growth lately, Industrie De Nora's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Industrie De Nora

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Industrie De Nora.

Is There Some Growth For Industrie De Nora?

Industrie De Nora'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.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 63%. As a result, earnings from three years ago have also fallen 12% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest earnings growth is heading into negative territory, declining 3.0% each year over the next three years. Meanwhile, the broader market is forecast to expand by 20% per annum, which paints a poor picture.

In light of this, it's somewhat alarming that Industrie De Nora's P/E sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the negative growth outlook.

The Bottom Line On Industrie De Nora's 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 Industrie De Nora's analyst forecasts revealed that its outlook for shrinking earnings isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings are unlikely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Before you settle on your opinion, we've discovered 2 warning signs for Industrie De Nora (1 is concerning!) that you should be aware of.

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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.