TTS (Transport Trade Services) S.A. (BVB:TTS) Stock's 30% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Unfortunately for some shareholders, the TTS (Transport Trade Services) S.A. (BVB:TTS) share price has dived 30% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 39% in that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about TTS (Transport Trade Services)'s P/E ratio of 11.5x, since the median price-to-earnings (or "P/E") ratio in Romania is also close to 13x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

TTS (Transport Trade Services) could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Check out our latest analysis for TTS (Transport Trade Services)

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Is There Some Growth For TTS (Transport Trade Services)?

The only time you'd be comfortable seeing a P/E like TTS (Transport Trade Services)'s is when the company's growth is tracking the market closely.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 72%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 21% overall rise in EPS. So we can start by confirming that the company has generally done a good job of growing earnings over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the one analyst covering the company suggest earnings growth will be highly resilient over the next year growing by 249%. With the rest of the market predicted to shrink by 7.6%, that would be a fantastic result.

In light of this, it's peculiar that TTS (Transport Trade Services)'s P/E sits in line with the majority of other companies. It looks like most investors aren't convinced the company can achieve positive future growth in the face of a shrinking broader market.

The Bottom Line On TTS (Transport Trade Services)'s P/E

With its share price falling into a hole, the P/E for TTS (Transport Trade Services) looks quite average now. 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 TTS (Transport Trade Services) currently trades on a lower than expected P/E since its growth forecasts are potentially beating a struggling market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. One major risk is whether its earnings trajectory can keep outperforming under these tough market conditions. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for TTS (Transport Trade Services) that you should be aware of.

If you're unsure about the strength of TTS (Transport Trade Services)'s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.