The Italian Sea Group S.p.A. (BIT:TISG) Stock's 27% Dive Might Signal An Opportunity But It Requires Some Scrutiny

The Italian Sea Group S.p.A. (BIT:TISG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 53% loss during that time.

After such a large drop in price, Italian Sea Group may be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11.3x, since almost half of all companies in Italy have P/E ratios greater than 17x and even P/E's higher than 29x are not unusual. 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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While the market has experienced earnings growth lately, Italian Sea Group's earnings have gone into reverse gear, which is not great. 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.

Check out our latest analysis for Italian Sea Group

Want the full picture on analyst estimates for the company? Then our free report on Italian Sea Group will help you uncover what's on the horizon.

Is There Any Growth For Italian Sea Group?

Italian Sea Group's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 67% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 10% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 40% per year during the coming three years according to the three analysts following the company. That's shaping up to be materially higher than the 15% per annum growth forecast for the broader market.

With this information, we find it odd that Italian Sea Group is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Italian Sea Group's P/E?

The softening of Italian Sea Group's shares means its P/E is now sitting at a pretty low level. 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.

We've established that Italian Sea Group currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Italian Sea Group that you should be aware of.

You might be able to find a better investment than Italian Sea Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.