d'Amico International Shipping S.A. (BIT:DIS) Looks Inexpensive After Falling 26% But Perhaps Not Attractive Enough

Unfortunately for some shareholders, the d'Amico International Shipping S.A. (BIT:DIS) share price has dived 26% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 20% share price drop.

In spite of the heavy fall in price, given about half the companies in Italy have price-to-earnings ratios (or "P/E's") above 14x, you may still consider d'Amico International Shipping as a highly attractive investment with its 2.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

d'Amico International Shipping hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for d'Amico International Shipping

Keen to find out how analysts think d'Amico International Shipping's future stacks up against the industry? In that case, our free report is a great place to start.

How Is d'Amico International Shipping's Growth Trending?

In order to justify its P/E ratio, d'Amico International Shipping would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a frustrating 5.6% decrease to the company's bottom line. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to slump, contracting by 35% during the coming year according to the five analysts following the company. That's not great when the rest of the market is expected to grow by 23%.

With this information, we are not surprised that d'Amico International Shipping 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 Key Takeaway

d'Amico International Shipping's P/E looks about as weak as its stock price lately. 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 d'Amico International Shipping maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for d'Amico International Shipping (1 doesn't sit too well with us) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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

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.