Lacklustre Performance Is Driving CMR, S.A.B. de C.V.'s (BMV:CMRB) Low P/E

When close to half the companies in Mexico have price-to-earnings ratios (or "P/E's") above 12x, you may consider CMR, S.A.B. de C.V. (BMV:CMRB) as an attractive investment with its 9.4x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

The recent earnings growth at CMR. de would have to be considered satisfactory if not spectacular. One possibility is that the P/E is low because investors think this good earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Check out our latest analysis for CMR. de

Although there are no analyst estimates available for CMR. de, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For CMR. de?

The only time you'd be truly comfortable seeing a P/E as low as CMR. de'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 worthy increase of 5.5%. Still, EPS has barely risen at all in aggregate from three years ago, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

This is in contrast to the rest of the market, which is expected to grow by 10% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that CMR. de's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of CMR. de revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with CMR. de (including 2 which are a bit concerning).

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

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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.