There's No Escaping Promotora y Operadora de Infraestructura, S. A. B. de C. V.'s (BMV:PINFRA) Muted Earnings

When close to half the companies in Mexico have price-to-earnings ratios (or "P/E's") above 13x, you may consider Promotora y Operadora de Infraestructura, S. A. B. de C. V. (BMV:PINFRA) as an attractive investment with its 10.5x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Promotora y Operadora de Infraestructura S. A. B. de C. V certainly has been doing a good job lately as it's been growing earnings more 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

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Promotora y Operadora de Infraestructura S. A. B. de C. V.

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

There's an inherent assumption that a company should underperform the market for P/E ratios like Promotora y Operadora de Infraestructura S. A. B. de C. V's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 35% gain to the company's bottom line. The latest three year period has also seen an excellent 64% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 2.0% per annum over the next three years. Meanwhile, the rest of the market is forecast to expand by 13% per annum, which is noticeably more attractive.

In light of this, it's understandable that Promotora y Operadora de Infraestructura S. A. B. de C. V's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

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 growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Promotora y Operadora de Infraestructura S. A. B. de C. V (of which 1 makes us a bit uncomfortable!) you should know about.

If these risks are making you reconsider your opinion on Promotora y Operadora de Infraestructura S. A. B. de C. V, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.