Yahoo Finance Anexo Group Plc's (LON:ANX) Share Price Is Matching Sentiment Around Its Earnings
When close to half the companies in the United Kingdom have price-to-earnings ratios (or "P/E's") above 16x, you may consider Anexo Group Plc (LON:ANX) as a highly attractive investment with its 3.6x 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.
With earnings that are retreating more than the market's of late, Anexo Group has been very sluggish. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.
Check out our latest analysis for Anexo Group
Want the full picture on analyst estimates for the company? Then our free report on Anexo Group will help you uncover what's on the horizon.
How Is Anexo Group's Growth Trending?
In order to justify its P/E ratio, Anexo Group would need to produce anemic growth that's substantially trailing the market.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 19%. Regardless, EPS has managed to lift by a handy 19% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing earnings over that time, even though it had some hiccups along the way.
Shifting to the future, estimates from the two analysts covering the company suggest earnings growth is heading into negative territory, declining 3.9% over the next year. With the market predicted to deliver 13% growth , that's a disappointing outcome.
In light of this, it's understandable that Anexo Group's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
The Final Word
While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
As we suspected, our examination of Anexo 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. It's hard to see the share price rising strongly in the near future under these circumstances.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Anexo Group (1 is potentially serious!) that you should be aware of before investing here.
You might be able to find a better investment than Anexo Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.
