Little Excitement Around Landis+Gyr Group AG's (VTX:LAND) Earnings
With a price-to-earnings (or "P/E") ratio of 10.3x Landis+Gyr Group AG (VTX:LAND) may be sending bullish signals at the moment, given that almost half of all companies in Switzerland have P/E ratios greater than 20x and even P/E's higher than 33x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.
Recent times have been pleasing for Landis+Gyr Group as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Check out our latest analysis for Landis+Gyr Group
Want the full picture on analyst estimates for the company? Then our free report on Landis+Gyr Group will help you uncover what's on the horizon.
How Is Landis+Gyr Group's Growth Trending?
In order to justify its P/E ratio, Landis+Gyr Group would need to produce sluggish growth that's trailing the market.
If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period has seen an excellent 73% overall rise in EPS, in spite of its uninspiring short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Shifting to the future, estimates from the eight analysts covering the company suggest earnings growth is heading into negative territory, declining 18% per year over the next three years. With the market predicted to deliver 11% growth per annum, that's a disappointing outcome.
With this information, we are not surprised that Landis+Gyr Group is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.
The Key Takeaway
Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
As we suspected, our examination of Landis+Gyr 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.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Landis+Gyr Group (1 makes us a bit uncomfortable!) that you need to be mindful of.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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.
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