Compañía de Minas Buenaventura S.A.A.'s (NYSE:BVN) P/E Is Still On The Mark Following 55% Share Price Bounce

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.

Compañía de Minas BuenaventuraA has been struggling lately as its earnings have declined faster 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. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out 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?

Compañía de Minas BuenaventuraA's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than 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 42%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 170% over the next year. Meanwhile, the rest of the market is forecast to only expand by 10%, which is noticeably less attractive.

With this information, we can see why Compañía de Minas BuenaventuraA is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Shares in Compañía de Minas BuenaventuraA have built up some good momentum lately, which has really inflated its P/E. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

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. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Compañía de Minas BuenaventuraA that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.