Promotora y Operadora de Infraestructura, S. A. B. de C. V. (BMV:PINFRA) Looks Inexpensive But Perhaps Not Attractive Enough

Promotora y Operadora de Infraestructura, S. A. B. de C. V.'s (BMV:PINFRA) price-to-earnings (or "P/E") ratio of 9.4x might make it look like a buy right now compared to the market in Mexico, where around half of the companies have P/E ratios above 12x and even P/E's above 18x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Promotora y Operadora de Infraestructura S. A. B. de C. V as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Promotora y Operadora de Infraestructura S. A. B. de C. V

Keen to find out how analysts think Promotora y Operadora de Infraestructura S. A. B. de C. V's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Promotora y Operadora de Infraestructura S. A. B. de C. V's Growth Trending?

Promotora y Operadora de Infraestructura S. A. B. de C. V's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 52%. The latest three year period has also seen an excellent 104% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to slump, contracting by 0.2% during the coming year according to the seven analysts following the company. Meanwhile, the broader market is forecast to expand by 19%, which paints a poor picture.

With this information, we are not surprised that Promotora y Operadora de Infraestructura S. A. B. de C. V is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Bottom Line On Promotora y Operadora de Infraestructura S. A. B. de C. V's P/E

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Promotora y Operadora de Infraestructura S. A. B. de C. V maintains its low P/E on the weakness of its forecast for sliding earnings, 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.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Promotora y Operadora de Infraestructura S. A. B. de C. V that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.