Compañía de Minas Buenaventura S.A.A.'s (NYSE:BVN) 55% Jump Shows Its Popularity With Investors

Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) shares have continued their recent momentum with a 55% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 84% in the last year.

Following the firm bounce in price, Compañía de Minas BuenaventuraA's price-to-earnings (or "P/E") ratio of 43.4x might make it look like a strong sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 16x and even P/E's below 9x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times haven't been advantageous for Compañía de Minas BuenaventuraA as its earnings have been falling quicker than most other companies. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Compañía de Minas BuenaventuraA

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

Is There Enough Growth For Compañía de Minas BuenaventuraA?

The only time you'd be truly comfortable seeing a P/E as steep as Compañía de Minas BuenaventuraA's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a frustrating 42% decrease to the company's bottom line. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 170% as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 10% growth forecast for the broader market.

In light of this, it's understandable that Compañía de Minas BuenaventuraA's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Compañía de Minas BuenaventuraA's P/E

The strong share price surge has got Compañía de Minas BuenaventuraA's P/E rushing to great heights as well. 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 Compañía de Minas BuenaventuraA's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Compañía de Minas BuenaventuraA that you should be aware of.

If you're unsure about the strength of Compañía de Minas BuenaventuraA'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.