Grupo Aeroportuario del Sureste, S. A. B. de C. V. (BMV:ASURB) Investors Are Less Pessimistic Than Expected

With a price-to-earnings (or "P/E") ratio of 14.8x Grupo Aeroportuario del Sureste, S. A. B. de C. V. (BMV:ASURB) may be sending bearish signals at the moment, given that almost half of all companies in Mexico have P/E ratios under 12x 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 elevated P/E.

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Recent times haven't been advantageous for Grupo Aeroportuario del Sureste S. A. B. de C. V as its earnings have been rising slower than most other companies. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

View our latest analysis for Grupo Aeroportuario del Sureste S. A. B. de C. V

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How Is Grupo Aeroportuario del Sureste S. A. B. de C. V's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Grupo Aeroportuario del Sureste S. A. B. de C. V's is when the company's growth is on track to outshine the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 3.8% last year. The latest three year period has also seen an excellent 43% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 9.9% per year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 11% per annum, which is not materially different.

In light of this, it's curious that Grupo Aeroportuario del Sureste S. A. B. de C. V's P/E sits above the majority of other companies. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/E falls to levels more in line with the growth outlook.

The Key Takeaway

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.

We've established that Grupo Aeroportuario del Sureste S. A. B. de C. V currently trades on a higher than expected P/E since its forecast growth is only in line with the wider market. Right now we are uncomfortable with the relatively high share price as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Grupo Aeroportuario del Sureste S. A. B. de C. V that you should be aware of.

If you're unsure about the strength of Grupo Aeroportuario del Sureste S. A. B. de C. V'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.