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華爾街日報The Market Lifts Mineral & Financial Investments Limited (LON:MAFL) Shares 33% But It Can Do More
Mineral & Financial Investments Limited (LON:MAFL) shareholders have had their patience rewarded with a 33% share price jump in the last month. The last month tops off a massive increase of 233% in the last year.
Even after such a large jump in price, given about half the companies in the United Kingdom have price-to-earnings ratios (or "P/E's") above 17x, you may still consider Mineral & Financial Investments as a highly attractive investment with its 7.4x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.
Earnings have risen firmly for Mineral & Financial Investments 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.
View our latest analysis for Mineral & Financial Investments
Does Growth Match The Low P/E?
There's an inherent assumption that a company should far underperform the market for P/E ratios like Mineral & Financial Investments' to be considered reasonable.
Taking a look back first, we see that the company managed to grow earnings per share by a handy 8.1% last year. This was backed up an excellent period prior to see EPS up by 125% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
This is in contrast to the rest of the market, which is expected to grow by 19% over the next year, materially lower than the company's recent medium-term annualised growth rates.
In light of this, it's peculiar that Mineral & Financial Investments' P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.
What We Can Learn From Mineral & Financial Investments' P/E?
Shares in Mineral & Financial Investments are going to need a lot more upward momentum to get the company's P/E out of its slump. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
Our examination of Mineral & Financial Investments revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Mineral & Financial Investments 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.
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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.