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There's No Escaping Compañía Española de Viviendas en Alquiler S.A.'s (BME:CEV) Muted Earnings

Simply Wall St · 07/30 04:11

Compañía Española de Viviendas en Alquiler S.A.'s (BME:CEV) price-to-earnings (or "P/E") ratio of 8.2x might make it look like a strong buy right now compared to the market in Spain, where around half of the companies have P/E ratios above 19x and even P/E's above 31x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

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With earnings growth that's superior to most other companies of late, Compañía Española de Viviendas en Alquiler has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Compañía Española de Viviendas en Alquiler

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BME:CEV Price to Earnings Ratio vs Industry July 30th 2025
Want the full picture on analyst estimates for the company? Then our free report on Compañía Española de Viviendas en Alquiler will help you uncover what's on the horizon.

How Is Compañía Española de Viviendas en Alquiler's Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Compañía Española de Viviendas en Alquiler's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 117%. However, this wasn't enough as the latest three year period has seen a very unpleasant 3.5% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the sole analyst covering the company suggest earnings growth is heading into negative territory, declining 17% per year over the next three years. With the market predicted to deliver 13% growth per year, that's a disappointing outcome.

With this information, we are not surprised that Compañía Española de Viviendas en Alquiler is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

What We Can Learn From Compañía Española de Viviendas en Alquiler's P/E?

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 Compañía Española de Viviendas en Alquiler maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Compañía Española de Viviendas en Alquiler has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

If you're unsure about the strength of Compañía Española de Viviendas en Alquiler's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.