Benign Growth For Cementir Holding N.V. (BIT:CEM) Underpins Its Share Price

With a price-to-earnings (or "P/E") ratio of 12x Cementir Holding N.V. (BIT:CEM) may be sending bullish signals at the moment, given that almost half of all companies in Italy have P/E ratios greater than 18x and even P/E's higher than 29x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

With earnings growth that's superior to most other companies of late, Cementir Holding has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Cementir Holding

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

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Cementir Holding's is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 18%. As a result, it also grew EPS by 24% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Looking ahead now, EPS is anticipated to climb by 7.2% each year during the coming three years according to the six analysts following the company. That's shaping up to be materially lower than the 20% per year growth forecast for the broader market.

With this information, we can see why Cementir Holding is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Cementir Holding's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. 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.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Cementir Holding with six simple checks will allow you to discover any risks that could be an issue.

Of course, you might also be able to find a better stock than Cementir Holding. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.