Investors Give SC Comrep SA (BVB:COTN) Shares A 30% Hiding

SC Comrep SA (BVB:COTN) shares have had a horrible month, losing 30% after a relatively good period beforehand. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

After such a large drop in price, given about half the companies in Romania have price-to-earnings ratios (or "P/E's") above 16x, you may consider SC Comrep as a highly attractive investment with its 4.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

As an illustration, earnings have deteriorated at SC Comrep over the last year, which is not ideal at all. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for SC Comrep

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on SC Comrep's earnings, revenue and cash flow.

How Is SC Comrep's Growth Trending?

SC Comrep'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 a frustrating 56% decrease to the company's bottom line. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Weighing the recent medium-term upward earnings trajectory against the broader market's one-year forecast for contraction of 7.1% shows it's a great look while it lasts.

With this information, we find it very odd that SC Comrep is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader market.

The Bottom Line On SC Comrep's P/E

Having almost fallen off a cliff, SC Comrep'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.

Our examination of SC Comrep revealed its growing earnings over the medium-term aren't contributing to its P/E anywhere near as much as we would have predicted, given the market is set to shrink. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader market turmoil. It appears many are indeed anticipating earnings instability, because this relative performance should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for SC Comrep (2 are potentially serious) you should be aware of.

Of course, you might also be able to find a better stock than SC Comrep. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.