Benign Growth For Wilh. Wilhelmsen Holding ASA (OB:WWI) Underpins Its Share Price

With a price-to-earnings (or "P/E") ratio of 3.6x Wilh. Wilhelmsen Holding ASA (OB:WWI) may be sending very bullish signals at the moment, given that almost half of all companies in Norway have P/E ratios greater than 11x and even P/E's higher than 21x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been advantageous for Wilh. Wilhelmsen Holding 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.

See our latest analysis for Wilh. Wilhelmsen Holding

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Wilh. Wilhelmsen Holding.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as depressed as Wilh. Wilhelmsen Holding's is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 35%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 3.5% as estimated by the dual analysts watching the company. With the market predicted to deliver 32% growth , that's a disappointing outcome.

With this information, we are not surprised that Wilh. Wilhelmsen Holding is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

What We Can Learn From Wilh. Wilhelmsen Holding's P/E?

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.

As we suspected, our examination of Wilh. Wilhelmsen Holding's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Wilh. Wilhelmsen Holding 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.

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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.