PJSC LSR Group (MCX:LSRG) Not Doing Enough For Some Investors As Its Shares Slump 31%

By
Simply Wall St
Published
February 25, 2022
MISX:LSRG
Source: Shutterstock

To the annoyance of some shareholders, PJSC LSR Group (MCX:LSRG) shares are down a considerable 31% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 48% share price drop.

Since its price has dipped substantially, PJSC LSR Group's price-to-earnings (or "P/E") ratio of 3x might make it look like a strong buy right now compared to the market in Russia, where around half of the companies have P/E ratios above 8x and even P/E's above 13x are quite common. 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.

With earnings growth that's superior to most other companies of late, PJSC LSR Group 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 PJSC LSR Group

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MISX:LSRG Price Based on Past Earnings February 25th 2022
Keen to find out how analysts think PJSC LSR Group's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The Low P/E?

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

Retrospectively, the last year delivered an exceptional 85% gain to the company's bottom line. Still, incredibly EPS has fallen 12% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to slump, contracting by 3.6% per year during the coming three years according to the five analysts following the company. That's not great when the rest of the market is expected to grow by 7.7% each year.

In light of this, it's understandable that PJSC LSR Group's P/E would sit below the majority of other companies. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

Having almost fallen off a cliff, PJSC LSR Group'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.

As we suspected, our examination of PJSC LSR Group's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 5 warning signs for PJSC LSR Group (3 are potentially serious!) that you need to be mindful of.

Of course, you might also be able to find a better stock than PJSC LSR Group. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.

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