Investors Still Waiting For A Pull Back In Infrastrutture Wireless Italiane S.p.A. (BIT:INW)

When close to half the companies in Italy have price-to-earnings ratios (or "P/E's") below 14x, you may consider Infrastrutture Wireless Italiane S.p.A. (BIT:INW) as a stock to avoid entirely with its 31.1x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Infrastrutture Wireless Italiane as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Infrastrutture Wireless Italiane

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

Is There Enough Growth For Infrastrutture Wireless Italiane?

In order to justify its P/E ratio, Infrastrutture Wireless Italiane would need to produce outstanding growth well in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 34%. The latest three year period has also seen an excellent 35% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 16% per annum as estimated by the analysts watching the company. With the market only predicted to deliver 12% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Infrastrutture Wireless Italiane's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

As we suspected, our examination of Infrastrutture Wireless Italiane's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Infrastrutture Wireless Italiane you should know about.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.