Vista Energy, S.A.B. de C.V. (BMV:VISTAA) Screens Well But There Might Be A Catch

Vista Energy, S.A.B. de C.V.'s (BMV:VISTAA) price-to-earnings (or "P/E") ratio of 6.3x might 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 12x and even P/E's above 18x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's superior to most other companies of late, Vista Energy. de 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 Vista Energy. de

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Does Growth Match The Low P/E?

Vista Energy. de's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 434%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to climb by 21% during the coming year according to the five analysts following the company. That's shaping up to be materially higher than the 13% growth forecast for the broader market.

In light of this, it's peculiar that Vista Energy. de's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

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.

Our examination of Vista Energy. de's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Vista Energy. de that you should be aware of.

Of course, you might also be able to find a better stock than Vista Energy. de. So you may wish to see this free collection of other companies that sit on P/E's below 20x 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.