Investors Aren't Buying The Navigator Company, S.A.'s (ELI:NVG) Earnings

With a price-to-earnings (or "P/E") ratio of 7.9x The Navigator Company, S.A. (ELI:NVG) may be sending bullish signals at the moment, given that almost half of all companies in Portugal have P/E ratios greater than 15x and even P/E's higher than 23x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Navigator Company could be doing better as it's been growing earnings less than most other companies lately. The P/E is probably low because investors think this lacklustre earnings performance isn't going to get any better. If you still like the company, you'd be hoping earnings don't get any worse and that you could pick up some stock while it's out of favour.

Check out our latest analysis for Navigator Company

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

How Is Navigator Company's Growth Trending?

In order to justify its P/E ratio, Navigator Company would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 4.4% last year. The latest three year period has also seen an excellent 67% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 1.3% each year over the next three years. That's shaping up to be materially lower than the 7.5% per year growth forecast for the broader market.

With this information, we can see why Navigator Company is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Navigator Company'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.

As we suspected, our examination of Navigator Company's analyst forecasts revealed that its inferior earnings outlook 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.

Before you settle on your opinion, we've discovered 3 warning signs for Navigator Company (1 shouldn't be ignored!) that you should be aware of.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.