OT Logistics S.A. (WSE:OTS) shareholders would be excited to see that the share price has had a great month, posting a 34% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.
In spite of the firm bounce in price, OT Logistics may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.4x, since almost half of all companies in Poland have P/E ratios greater than 13x and even P/E's higher than 25x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E. Portable Surgical Light
Earnings have risen firmly for OT Logistics recently, which is pleasing to see. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. 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.
See our latest analysis for OT Logistics
OT Logistics' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.
If we review the last year of earnings growth, the company posted a worthy increase of 11%. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
This is in contrast to the rest of the market, which is expected to grow by 9.0% over the next year, materially higher than the company's recent medium-term annualised growth rates.
With this information, we can see why OT Logistics is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.
Even after such a strong price move, OT Logistics' P/E still trails the rest of the market significantly. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that OT Logistics maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Plus, you should also learn about this 1 warning sign we've spotted with OT Logistics.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.
Find out whether OT Logistics is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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Provides a range of transport, freight forwarding, and logistics services in Germany, Belgium, the Netherlands, Austria, Poland, the Czech Republic, Slovakia, and Hungary.
Excellent balance sheet established dividend payer.
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