Investors Still Aren't Entirely Convinced By S.C. Avicola Slobozia S.A.'s (BVB:AVSL) Earnings Despite 30% Price Jump

S.C. Avicola Slobozia S.A. (BVB:AVSL) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Although its price has surged higher, S.C. Avicola Slobozia may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.9x, since almost half of all companies in Romania have P/E ratios greater than 13x and even P/E's higher than 36x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been quite advantageous for S.C. Avicola Slobozia as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 S.C. Avicola Slobozia

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 S.C. Avicola Slobozia's earnings, revenue and cash flow.

Is There Any Growth For S.C. Avicola Slobozia?

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

Retrospectively, the last year delivered an exceptional 128% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

In contrast to the company, the rest of the market is expected to decline by 6.2% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

With this information, we find it very odd that S.C. Avicola Slobozia is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On S.C. Avicola Slobozia's P/E

Even after such a strong price move, S.C. Avicola Slobozia's P/E still trails the rest of the market significantly. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that S.C. Avicola Slobozia currently trades on a much lower than expected P/E since its recent three-year earnings growth is beating forecasts for a struggling market. 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.

Before you take the next step, you should know about the 3 warning signs for S.C. Avicola Slobozia (2 are concerning!) that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.