Yahoo Finance Getting In Cheap On Energiedienst Holding AG (VTX:EDHN) Is Unlikely
It's not a stretch to say that Energiedienst Holding AG's (VTX:EDHN) price-to-earnings (or "P/E") ratio of 16.9x right now seems quite "middle-of-the-road" compared to the market in Switzerland, where the median P/E ratio is around 19x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
While the market has experienced earnings growth lately, Energiedienst Holding's earnings have gone into reverse gear, which is not great. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
See our latest analysis for Energiedienst Holding
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Energiedienst Holding.
How Is Energiedienst Holding's Growth Trending?
In order to justify its P/E ratio, Energiedienst Holding would need to produce growth that's similar to the market.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 39%. Still, the latest three year period has seen an excellent 1,907% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.
Turning to the outlook, the next three years should generate growth of 0.7% each year as estimated by the one analyst watching the company. With the market predicted to deliver 8.7% growth per annum, the company is positioned for a weaker earnings result.
With this information, we find it interesting that Energiedienst Holding is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.
What We Can Learn From Energiedienst Holding's P/E?
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.
We've established that Energiedienst Holding currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Energiedienst Holding (1 can't be ignored!) that you need to be mindful 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).
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
