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Unfortunately for some shareholders, the Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania (MCX:KTSB) share price has dived 30% in the last thirty days. The recent drop has obliterated the annual return, with the share price now down 14% over that longer period.
Assuming nothing else has changed, a lower share price makes a stock more attractive to potential buyers. In the long term, share prices tend to follow earnings per share, but in the short term prices bounce around in response to short term factors (which are not always obvious). The implication here is that long term investors have an opportunity when expectations of a company are too low. One way to gauge market expectations of a stock is to look at its Price to Earnings Ratio (PE Ratio). A high P/E ratio means that investors have a high expectation about future growth, while a low P/E ratio means they have low expectations about future growth.
Check out our latest analysis for Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania
How Does Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania's P/E Ratio Compare To Its Peers?
We can tell from its P/E ratio of 10.85 that there is some investor optimism about Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania. The image below shows that Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania has a higher P/E than the average (6.4) P/E for companies in the electric utilities industry.
Its relatively high P/E ratio indicates that Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania shareholders think it will perform better than other companies in its industry classification. The market is optimistic about the future, but that doesn't guarantee future growth. So further research is always essential. I often monitor director buying and selling.
How Growth Rates Impact P/E Ratios
Earnings growth rates have a big influence on P/E ratios. That's because companies that grow earnings per share quickly will rapidly increase the 'E' in the equation. Therefore, even if you pay a high multiple of earnings now, that multiple will become lower in the future. A lower P/E should indicate the stock is cheap relative to others -- and that may attract buyers.
Most would be impressed by Publichnoe Akcionernoe Obshestvo Kostromskaya Sbytovaya Compania earnings growth of 13% in the last year.
Don't Forget: The P/E Does Not Account For Debt or Bank Deposits
One drawback of using a P/E ratio is that it considers market capitalization, but not the balance sheet. So it won't reflect the advantage of cash, or disadvantage of debt. Hypothetically, a company could reduce its future P/E ratio by spending its cash (or taking on debt) to achieve higher earnings.