Fewer Investors Than Expected Jumping On CALIDA Holding AG (VTX:CALN)
It's not a stretch to say that CALIDA Holding AG's (VTX:CALN) price-to-earnings (or "P/E") ratio of 17.9x right now seems quite "middle-of-the-road" compared to the market in Switzerland, where the median P/E ratio is around 19x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
CALIDA Holding could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
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Keen to find out how analysts think CALIDA Holding's future stacks up against the industry? In that case, our free report is a great place to start.
How Is CALIDA Holding's Growth Trending?
There's an inherent assumption that a company should be matching the market for P/E ratios like CALIDA Holding's to be considered reasonable.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 17%. Regardless, EPS has managed to lift by a handy 15% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.
Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 19% per annum over the next three years. That's shaping up to be materially higher than the 8.7% per year growth forecast for the broader market.
With this information, we find it interesting that CALIDA Holding is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.
What We Can Learn From CALIDA Holding's 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.
Our examination of CALIDA Holding's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for CALIDA Holding with six simple checks.
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.