Investors Don't See Light At End Of Konecranes Plc's (HEL:KCR) Tunnel And Push Stock Down 27%

Konecranes Plc (HEL:KCR) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The last month has meant the stock is now only up 2.7% during the last year.

In spite of the heavy fall in price, given about half the companies in Finland have price-to-earnings ratios (or "P/E's") above 19x, you may still consider Konecranes as an attractive investment with its 10.9x 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 limited.

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Konecranes certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. 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.

View our latest analysis for Konecranes

Want the full picture on analyst estimates for the company? Then our free report on Konecranes will help you uncover what's on the horizon.

Is There Any Growth For Konecranes?

The only time you'd be truly comfortable seeing a P/E as low as Konecranes' is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 34% last year. The strong recent performance means it was also able to grow EPS by 151% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 6.2% per annum during the coming three years according to the six analysts following the company. With the market predicted to deliver 13% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Konecranes' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Konecranes' recently weak share price has pulled its P/E below most other companies. 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.

As we suspected, our examination of Konecranes' analyst forecasts revealed that its inferior earnings outlook 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Konecranes that you should be aware 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.