Investors Aren't Entirely Convinced By Dometic Group AB (publ)'s (STO:DOM) Earnings

When close to half the companies in Sweden have price-to-earnings ratios (or "P/E's") above 24x, you may consider Dometic Group AB (publ) (STO:DOM) as an attractive investment with its 18.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

While the market has experienced earnings growth lately, Dometic Group's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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 Dometic Group

Keen to find out how analysts think Dometic Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Dometic Group?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 22%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 60% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 20% per annum during the coming three years according to the six analysts following the company. Meanwhile, the rest of the market is forecast to expand by 19% per year, which is not materially different.

With this information, we find it odd that Dometic Group is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Dometic Group's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Dometic Group's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Dometic Group you should be aware of.

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.