There Is A Reason El Puerto de Liverpool, S.A.B. de C.V.'s (BMV:LIVEPOLC-1) Price Is Undemanding

When close to half the companies in Mexico have price-to-earnings ratios (or "P/E's") above 14x, you may consider El Puerto de Liverpool, S.A.B. de C.V. (BMV:LIVEPOLC-1) as an attractive investment with its 8.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

El Puerto de Liverpool. de's earnings growth of late has been pretty similar to most other companies. One possibility is that the P/E is low because investors think this modest earnings performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

See our latest analysis for El Puerto de Liverpool. de

Want the full picture on analyst estimates for the company? Then our free report on El Puerto de Liverpool. de will help you uncover what's on the horizon.

Is There Any Growth For El Puerto de Liverpool. de?

In order to justify its P/E ratio, El Puerto de Liverpool. de would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 11% last year. The latest three year period has also seen an excellent 416% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 7.2% per annum over the next three years. That's shaping up to be materially lower than the 9.5% each year growth forecast for the broader market.

With this information, we can see why El Puerto de Liverpool. de is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From El Puerto de Liverpool. 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.

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. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

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

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.