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Intelbras SA – Indústria de Telecomunicação Eletrônica Brasileira’s (BVMF:INTB3) company is lagging the market, but its shares are not

Intelbras SA – Industry of Telecomunicação Eletrônica Brasileira’s (BVMF:INTB3) a price-to-earnings ratio (or “P/E”) of 13x could make it look like a sell right now compared to the market in Brazil, where about half of the companies have a price-to-earnings ratio of below 10x and even price-to-earnings ratios below 7x are quite common. Although it is not wise to take the price-to-earnings ratio at face value, as there may be an explanation as to why it is so high.

There hasn’t been much difference between Intelbras – Indústria de Telecomunicação Eletrônica Brasileira’s earnings growth lately and the market. It may be that many expect the mediocre earnings performance to strengthen positively, which is why the price-to-earnings ratio has not fallen. If not, existing shareholders may be somewhat nervous about the viability of the share price.

Check out our latest analysis for Intelbras – Indústria de Telecomunicação Eletrônica Brasileira

BOVESPA:INTB3 Price-to-earnings ratio versus sector May 1, 2024

Want to know how analysts think the future of Intelbras – Indústria de Telecomunicação Eletrônica Brasileira compares to the industry? In that case our free report is a good starting point.

Is there enough growth for Intelbras – Indústria de Telecomunicação Eletrônica Brasileira?

To justify its price-to-earnings ratio, Intelbras – Indústria de Telecomunicação Eletrônica Brasileira would have to achieve impressive growth that exceeds the market.

Looking back first, we see that the company managed to grow earnings per share by a handy 10% last year. Earnings per share are also up 15% overall from three years ago, partly due to growth over the past twelve months. Therefore, it’s fair to say that earnings growth has been respectable for the company lately.

In terms of prospects, the next three years should generate growth of 12% per year, as estimated by the six analysts covering the company. That appears to be significantly lower than the 17% annual growth forecast for the broader market.

With this information, we find it concerning that Intelbras – Indústria de Telecomunicação Eletrônica Brasileira is trading at a higher than market price-to-earnings ratio. Apparently, many investors in the company are much more optimistic than analysts indicate and are unwilling to let go of their shares at any price. Only the boldest would assume these prices are sustainable, as this level of earnings growth is likely to ultimately weigh heavily on the share price.

The most important takeaway

In general, we prefer to limit the use of the price-to-earnings ratio to assessing what the market thinks about the overall health of a company.

Our review of Intelbras – Indústria de Telecomunicação Eletrônica Brasileira analyst forecasts found that the lower earnings outlook isn’t having nearly as much of an impact on the high price-to-earnings ratio as we expected. At this point, we are increasingly uncomfortable with the high price-to-earnings ratio, as projected future earnings are unlikely to support this positive sentiment for long. This puts shareholders’ investments at significant risk and puts potential investors at risk of paying an excessive premium.

It is also worth noting that we have found 1 warning sign for Intelbras – Indústria de Telecomunicação Eletrônica Brasileira what you should take into account.

Naturally, You might find a fantastic investment by looking at a few good candidates. So take a look at this free list of companies with a strong growth trajectory, trading at a low price/earnings.

Valuation is complex, but we help make it simple.

Invent or Intelbras – Industrie de Telecomunicação Eletrônica Brasileira may be over or undervalued if you look at our comprehensive analysis, including fair value estimates, risks and cautions, dividends, insider transactions and financial health.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.