Ooredoo Q.P.S.C.'s (DSM:ORDS) price-to-earnings (or "P/E") ratio of 11.4x might make it look like a buy right now compared to the market in Qatar, where around half of the companies have P/E ratios above 14x and even P/E's above 18x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.
With earnings growth that's superior to most other companies of late, Ooredoo Q.P.S.C has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Check out our latest analysis for Ooredoo Q.P.S.C
How Is Ooredoo Q.P.S.C's Growth Trending?
Ooredoo Q.P.S.C's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.
Retrospectively, the last year delivered an exceptional 28% gain to the company's bottom line. The latest three year period has also seen an excellent 168% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Looking ahead now, EPS is anticipated to climb by 8.0% per annum during the coming three years according to the five analysts following the company. Meanwhile, the rest of the market is forecast to expand by 8.1% per year, which is not materially different.
In light of this, it's peculiar that Ooredoo Q.P.S.C's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.
The Key Takeaway
We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that Ooredoo Q.P.S.C currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
Plus, you should also learn about these 2 warning signs we've spotted with Ooredoo Q.P.S.C.
You might be able to find a better investment than Ooredoo Q.P.S.C. 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.
About DSM:ORDS
Ooredoo Q.P.S.C
Provides telecommunications services in Qatar, Asia, rest of the Middle East, and North Africa region.
Flawless balance sheet, undervalued and pays a dividend.
