Improved Earnings Required Before Vista Energy, S.A.B. de C.V. (BMV:VISTAA) Stock's 25% Jump Looks Justified

The Vista Energy, S.A.B. de C.V. (BMV:VISTAA) share price has done very well over the last month, posting an excellent gain of 25%. The last month tops off a massive increase of 102% in the last year.

Although its price has surged higher, Vista Energy. de's price-to-earnings (or "P/E") ratio of 9.5x might still make it look like a buy right now compared to the market in Mexico, where around half of the companies have P/E ratios above 13x and even P/E's above 21x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Vista Energy. de certainly has been doing a good job lately as it's been growing earnings more than most other companies. 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.

View our latest analysis for Vista Energy. de

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Does Growth Match The Low P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 38% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 14% as estimated by the six analysts watching the company. With the market predicted to deliver 12% growth , that's a disappointing outcome.

With this information, we are not surprised that Vista Energy. de 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. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On Vista Energy. de's P/E

The latest share price surge wasn't enough to lift Vista Energy. de's P/E close to the market median. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Vista Energy. de 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for Vista Energy. de (1 is a bit unpleasant!) that we have uncovered.

If you're unsure about the strength of Vista Energy. de's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.