Earnings Tell The Story For Becle, S.A.B. de C.V. (BMV:CUERVO) As Its Stock Soars 26%

Becle, S.A.B. de C.V. (BMV:CUERVO) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 33% over that time.

After such a large jump in price, Becle. de may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 20.3x, since almost half of all companies in Mexico have P/E ratios under 11x and even P/E's lower than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

We've discovered 1 warning sign about Becle. de. View them for free.

Becle. de hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Becle. de

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

What Are Growth Metrics Telling Us About The High P/E?

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

Retrospectively, the last year delivered a frustrating 16% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 21% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 26% per annum during the coming three years according to the seven analysts following the company. That's shaping up to be materially higher than the 12% each year growth forecast for the broader market.

With this information, we can see why Becle. de is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Becle. de's P/E?

The strong share price surge has got Becle. de's P/E rushing to great heights as well. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Becle. de's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 1 warning sign for Becle. de that you need to take into consideration.

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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