Vista Energy, S.A.B. de C.V.'s (BMV:VISTAA) Business Is Trailing The Market But Its Shares Aren't

It's not a stretch to say that Vista Energy, S.A.B. de C.V.'s (BMV:VISTAA) price-to-earnings (or "P/E") ratio of 11.8x right now seems quite "middle-of-the-road" compared to the market in Mexico, where the median P/E ratio is around 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

For instance, Vista Energy. de's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is moderate because investors think the company might still do enough to be in line with the broader market in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

View our latest analysis for Vista Energy. de

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Vista Energy. de will help you shine a light on its historical performance.

How Is Vista Energy. de's Growth Trending?

The only time you'd be comfortable seeing a P/E like Vista Energy. de's is when the company's growth is tracking the market closely.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 16%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 14% shows it's noticeably less attractive on an annualised basis.

With this information, we find it interesting that Vista Energy. de is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

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

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.

Our examination of Vista Energy. de revealed its three-year earnings trends aren't impacting its P/E as much as we would have predicted, given they look worse than current market expectations. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

You should always think about risks. Case in point, we've spotted 3 warning signs for Vista Energy. de you should be aware of, and 1 of them doesn't sit too well with us.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com