Grupo Aeroportuario del Pacífico, S.A.B. de C.V.'s (BMV:GAPB) Shares Climb 25% But Its Business Is Yet to Catch Up

Those holding Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (BMV:GAPB) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, despite the strong performance over the last month, the full year gain of 4.4% isn't as attractive.

Since its price has surged higher, Grupo Aeroportuario del Pacífico. de's price-to-earnings (or "P/E") ratio of 17x might make it look like a sell right now compared to the market in Mexico, where around half of the companies have P/E ratios below 12x and even P/E's below 8x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's inferior to most other companies of late, Grupo Aeroportuario del Pacífico. de has been relatively sluggish. 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 Pacífico. de

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Grupo Aeroportuario del Pacífico. de.

What Are Growth Metrics Telling Us About The High P/E?

Grupo Aeroportuario del Pacífico. de's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Although pleasingly EPS has lifted 213% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 4.6% per year during the coming three years according to the twelve analysts following the company. With the market predicted to deliver 9.5% growth per annum, the company is positioned for a weaker earnings result.

With this information, we find it concerning that Grupo Aeroportuario del Pacífico. de is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Key Takeaway

Grupo Aeroportuario del Pacífico. de shares have received a push in the right direction, but its P/E is elevated too. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Grupo Aeroportuario del Pacífico. de's analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 2 warning signs for Grupo Aeroportuario del Pacífico. de (1 is concerning!) that we have uncovered.

Of course, you might also be able to find a better stock than Grupo Aeroportuario del Pacífico. de. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.