Koninklijke Vopak N.V.'s (AMS:VPK) Earnings Are Not Doing Enough For Some Investors

Koninklijke Vopak N.V.'s (AMS:VPK) price-to-earnings (or "P/E") ratio of 13.2x might make it look like a buy right now compared to the market in the Netherlands, where around half of the companies have P/E ratios above 19x and even P/E's above 31x are quite common. 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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Koninklijke Vopak hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Koninklijke Vopak

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How Is Koninklijke Vopak's Growth Trending?

Koninklijke Vopak'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, dishearteningly the company's profits fell to the tune of 15%. Still, the latest three year period has seen an excellent 83% overall rise in EPS, in spite of its unsatisfying short-term performance. 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.

Looking ahead now, EPS is anticipated to climb by 11% each year during the coming three years according to the three analysts following the company. With the market predicted to deliver 15% growth each year, the company is positioned for a weaker earnings result.

With this information, we can see why Koninklijke Vopak is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Koninklijke Vopak's P/E?

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Koninklijke Vopak's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for Koninklijke Vopak you should be aware of.

If these risks are making you reconsider your opinion on Koninklijke Vopak, 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.