Shareholders Should Be Pleased With Grupo Aeroportuario del Pacífico, S.A.B. de C.V.'s (BMV:GAPB) Price

When close to half the companies in Mexico have price-to-earnings ratios (or "P/E's") below 11x, you may consider Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (BMV:GAPB) as a stock to avoid entirely with its 22.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

While the market has experienced earnings growth lately, Grupo Aeroportuario del Pacífico. de's earnings have gone into reverse gear, which is not great. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Grupo Aeroportuario del Pacífico. de

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How Is Grupo Aeroportuario del Pacífico. de's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Grupo Aeroportuario del Pacífico. de's to be considered reasonable.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 3.2%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 96% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 18% per annum over the next three years. With the market only predicted to deliver 13% per year, the company is positioned for a stronger earnings result.

With this information, we can see why Grupo Aeroportuario del Pacífico. de is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Grupo Aeroportuario del Pacífico. de's P/E

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 Grupo Aeroportuario del Pacífico. de's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Grupo Aeroportuario del Pacífico. de you should be aware of.

If you're unsure about the strength of Grupo Aeroportuario del Pacífico. 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.