Powszechny Zaklad Ubezpieczen SA's (WSE:PZU) Earnings Are Not Doing Enough For Some Investors

Powszechny Zaklad Ubezpieczen SA's (WSE:PZU) price-to-earnings (or "P/E") ratio of 7.6x might make it look like a buy right now compared to the market in Poland, where around half of the companies have P/E ratios above 11x and even P/E's above 20x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

While the market has experienced earnings growth lately, Powszechny Zaklad Ubezpieczen's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Powszechny Zaklad Ubezpieczen

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Powszechny Zaklad Ubezpieczen.

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

The only time you'd be truly comfortable seeing a P/E as low as Powszechny Zaklad Ubezpieczen's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 2.4% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 71% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 1.6% per annum over the next three years. Meanwhile, the rest of the market is forecast to expand by 6.5% per annum, which is noticeably more attractive.

With this information, we can see why Powszechny Zaklad Ubezpieczen 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 Powszechny Zaklad Ubezpieczen's P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Powszechny Zaklad Ubezpieczen maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. 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 Powszechny Zaklad Ubezpieczen you should be aware of.

You might be able to find a better investment than Powszechny Zaklad Ubezpieczen. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.