Fintech S.A.'s (WSE:FTH) 93% Dip In Price Shows Sentiment Is Matching Earnings

Fintech S.A. (WSE:FTH) shareholders that were waiting for something to happen have been dealt a blow with a 93% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 92% share price decline.

Since its price has dipped substantially, given about half the companies in Poland have price-to-earnings ratios (or "P/E's") above 12x, you may consider Fintech as a highly attractive investment with its 3.5x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

We'd have to say that with no tangible growth over the last year, Fintech's earnings have been unimpressive. It might be that many expect the uninspiring earnings performance to worsen, which has repressed the P/E. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

View our latest analysis for Fintech

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Fintech will help you shine a light on its historical performance.

Does Growth Match The Low P/E?

Fintech's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Retrospectively, the last year delivered virtually the same number to the company's bottom line as the year before. Likewise, not much has changed from three years ago as earnings have been stuck during that whole time. Therefore, it's fair to say that earnings growth has definitely eluded the company recently.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 19% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Fintech's P/E sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Fintech's P/E?

Having almost fallen off a cliff, Fintech's share price has pulled its P/E way down as well. 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.

As we suspected, our examination of Fintech revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term 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 3 warning signs for Fintech you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.