Why We're Not Concerned About América Móvil, S.A.B. de C.V.'s (BMV:AMXB) Share Price

With a median price-to-earnings (or "P/E") ratio of close to 13x in Mexico, you could be forgiven for feeling indifferent about América Móvil, S.A.B. de C.V.'s (BMV:AMXB) P/E ratio of 12.2x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Recent times haven't been advantageous for América Móvil. de as its earnings have been rising slower than most other companies. It might be that many expect the uninspiring earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for América Móvil. de

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Is There Some Growth For América Móvil. de?

There's an inherent assumption that a company should be matching the market for P/E ratios like América Móvil. de's to be considered reasonable.

If we review the last year of earnings growth, the company posted a worthy increase of 3.1%. Pleasingly, EPS has also lifted 189% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 9.0% per year as estimated by the analysts watching the company. That's shaping up to be similar to the 9.5% per annum growth forecast for the broader market.

In light of this, it's understandable that América Móvil. de's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

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 América Móvil. de's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with América Móvil. de, and understanding should be part of your investment process.

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.