El Puerto de Liverpool, S.A.B. de C.V.'s (BMV:LIVEPOLC-1) Price Is Right But Growth Is Lacking

When close to half the companies in Mexico have price-to-earnings ratios (or "P/E's") above 12x, you may consider El Puerto de Liverpool, S.A.B. de C.V. (BMV:LIVEPOLC-1) as an attractive investment with its 6.1x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

El Puerto de Liverpool. de certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for El Puerto de Liverpool. de

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How Is El Puerto de Liverpool. de's Growth Trending?

El Puerto de Liverpool. 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 176%. Pleasingly, EPS has also lifted 128% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 4.9% per annum during the coming three years according to the twelve analysts following the company. With the market predicted to deliver 14% growth per year, the company is positioned for a weaker earnings result.

With this information, we can see why El Puerto de Liverpool. de is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From El Puerto de Liverpool. de's P/E?

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 El Puerto de Liverpool. de maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

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

If you're unsure about the strength of El Puerto de Liverpool. 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.