There's No Escaping ATC CARGO S.A.'s (WSE:ATA) Muted Earnings

When close to half the companies in Poland have price-to-earnings ratios (or "P/E's") above 14x, you may consider ATC CARGO S.A. (WSE:ATA) as a highly attractive investment with its 6.4x 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.

Our free stock report includes 3 warning signs investors should be aware of before investing in ATC CARGO. Read for free now.

With earnings growth that's exceedingly strong of late, ATC CARGO has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for ATC CARGO

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

How Is ATC CARGO's Growth Trending?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 54% last year. Still, incredibly EPS has fallen 16% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

In contrast to the company, the rest of the market is expected to grow by 12% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

In light of this, it's understandable that ATC CARGO's P/E would sit below the majority of other companies. However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.

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.

As we suspected, our examination of ATC CARGO revealed its shrinking earnings over the medium-term are contributing to its low P/E, given the market is set to grow. 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.

It is also worth noting that we have found 3 warning signs for ATC CARGO (1 is significant!) that you need to take into consideration.

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.