Investors Give BFF Bank S.p.A. (BIT:BFF) Shares A 26% Hiding

BFF Bank S.p.A. (BIT:BFF) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 7.5% in the last year.

Although its price has dipped substantially, given about half the companies in Italy have price-to-earnings ratios (or "P/E's") above 15x, you may still consider BFF Bank as an attractive investment with its 10.2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

BFF Bank 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.

View our latest analysis for BFF Bank

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

How Is BFF Bank's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 33% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 36% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 17% each year as estimated by the nine analysts watching the company. That's shaping up to be similar to the 17% per year growth forecast for the broader market.

In light of this, it's peculiar that BFF Bank's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

BFF Bank's recently weak share price has pulled its P/E below most other companies. 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 BFF Bank's 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.

Before you settle on your opinion, we've discovered 3 warning signs for BFF Bank (2 make us uncomfortable!) that you should be aware of.

You might be able to find a better investment than BFF Bank. 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.