Is Qiwi plc (NASDAQ:QIWI) A Buy At Its Current PE Ratio?
I am writing today to help inform people who are new to the stock market and want to better understand how you can grow your money by investing in Qiwi plc (NASDAQ:QIWI).
Qiwi plc (NASDAQ:QIWI) is currently trading at a trailing P/E of 18.5x, which is lower than the industry average of 24.1x. While QIWI might seem like an attractive stock to buy, it is important to understand the assumptions behind the P/E ratio before you make any investment decisions. In this article, I will explain what the P/E ratio is as well as what you should look out for when using it. See our latest analysis for Qiwi
What you need to know about the P/E ratio
P/E is a popular ratio used for relative valuation. By comparing a stock’s price per share to its earnings per share, we are able to see how much investors are paying for each dollar of the company’s earnings.
P/E Calculation for QIWI
Price-Earnings Ratio = Price per share ÷ Earnings per share
QIWI Price-Earnings Ratio = RUB983.27 ÷ RUB53.122 = 18.5x
The P/E ratio itself doesn’t tell you a lot; however, it becomes very insightful when you compare it with other similar companies. We want to compare the stock’s P/E ratio to the average of companies that have similar characteristics as QIWI, such as size and country of operation. A common peer group is companies that exist in the same industry, which is what I use. Since QIWI’s P/E of 18.5x is lower than its industry peers (24.1x), it means that investors are paying less than they should for each dollar of QIWI’s earnings. Therefore, according to this analysis, QIWI is an under-priced stock.
Assumptions to be aware of
While our conclusion might prompt you to buy QIWI immediately, there are two important assumptions you should be aware of. The first is that our “similar companies” are actually similar to QIWI, or else the difference in P/E might be a result of other factors. For example, if you are comparing lower risk firms with QIWI, then its P/E would naturally be lower than its peers, as investors would value those with lower risk at a higher price. The second assumption that must hold true is that the stocks we are comparing QIWI to are fairly valued by the market. If this does not hold, there is a possibility that QIWI’s P/E is lower because our peer group is overvalued by the market.
What this means for you:
You may have already conducted fundamental analysis on the stock as a shareholder, so its current undervaluation could signal a good buying opportunity to increase your exposure to QIWI. Now that you understand the ins and outs of the PE metric, you should know to bear in mind its limitations before you make an investment decision. Remember that basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PE ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for QIWI’s future growth? Take a look at our free research report of analyst consensus for QIWI’s outlook.
Past Track Record: Has QIWI been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of QIWI’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
