Positive Sentiment Still Eludes Doverie United Holding AD (BUL:DUH) Following 42% Share Price Slump
Doverie United Holding AD (BUL:DUH) shareholders won't be pleased to see that the share price has had a very rough month, dropping 42% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 14% in that time.
Since its price has dipped substantially, given about half the companies in Bulgaria have price-to-earnings ratios (or "P/E's") above 31x, you may consider Doverie United Holding AD as a highly attractive investment with its 2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
Doverie United Holding AD certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong 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 Doverie United Holding AD
Is There Any Growth For Doverie United Holding AD?
Doverie United Holding AD's 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 terrific increase of 159%. The strong recent performance means it was also able to grow EPS by 76% 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.
It's interesting to note that the rest of the market is similarly expected to grow by 21% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.
With this information, we find it odd that Doverie United Holding AD is trading at a P/E lower than the market. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.
The Final Word
Having almost fallen off a cliff, Doverie United Holding AD's share price has pulled its P/E way down as well. 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.
We've established that Doverie United Holding AD currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.
You need to take note of risks, for example - Doverie United Holding AD has 2 warning signs (and 1 which is concerning) we think you should know about.
If you're unsure about the strength of Doverie United Holding AD's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.