Improved Earnings Required Before Oscar Properties Holding AB (publ) (STO:OP) Shares Find Their Feet

By
Simply Wall St
Published
May 08, 2022
OM:OP
Source: Shutterstock

When close to half the companies in Sweden have price-to-earnings ratios (or "P/E's") above 19x, you may consider Oscar Properties Holding AB (publ) (STO:OP) as a highly attractive investment with its 2.7x 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 so limited.

The earnings growth achieved at Oscar Properties Holding over the last year would be more than acceptable for most companies. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Oscar Properties Holding

pe
OM:OP Price Based on Past Earnings May 8th 2022
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 Oscar Properties Holding's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

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

If we review the last year of earnings growth, the company posted a worthy increase of 9.0%. Still, EPS has barely risen at all in aggregate from three years ago, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 19% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that Oscar Properties Holding's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

What We Can Learn From Oscar Properties Holding'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.

As we suspected, our examination of Oscar Properties Holding revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Oscar Properties Holding is showing 6 warning signs in our investment analysis, and 3 of those are a bit concerning.

You might be able to find a better investment than Oscar Properties Holding. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.