Market Participants Recognise Industrias Peñoles, S.A.B. de C.V.'s (BMV:PE&OLES) Earnings Pushing Shares 29% Higher

Industrias Peñoles, S.A.B. de C.V. (BMV:PE&OLES) shareholders have had their patience rewarded with a 29% share price jump in the last month. The last month tops off a massive increase of 107% in the last year.

Following the firm bounce in price, given close to half the companies in Mexico have price-to-earnings ratios (or "P/E's") below 12x, you may consider Industrias Peñoles. de as a stock to avoid entirely with its 35x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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Industrias Peñoles. de certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Industrias Peñoles. de

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Industrias Peñoles. de.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Industrias Peñoles. de's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 185% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 5.4% drop in EPS in aggregate. 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 31% per year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 14% each year, which is noticeably less attractive.

With this information, we can see why Industrias Peñoles. 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.

The Bottom Line On Industrias Peñoles. de's P/E

Industrias Peñoles. de's P/E is flying high just like its stock has during the last month. 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.

As we suspected, our examination of Industrias Peñoles. 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Industrias Peñoles. de is showing 1 warning sign in our investment analysis, you should know about.

You might be able to find a better investment than Industrias Peñoles. de. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.