In This Article:
This article is for investors who would like to improve their understanding of price to earnings ratios (P/E ratios). We’ll show how you can use Hamburger Hafen und Logistik Aktiengesellschaft’s (FRA:HHFA) P/E ratio to inform your assessment of the investment opportunity. Based on the last twelve months, Hamburger Hafen und Logistik’s P/E ratio is 16.55. That is equivalent to an earnings yield of about 6.0%.
See our latest analysis for Hamburger Hafen und Logistik
How Do I Calculate A Price To Earnings Ratio?
The formula for P/E is:
Price to Earnings Ratio = Price per Share ÷ Earnings per Share (EPS)
Or for Hamburger Hafen und Logistik:
P/E of 16.55 = €19.59 ÷ €1.18 (Based on the trailing twelve months to September 2018.)
Is A High P/E Ratio Good?
A higher P/E ratio means that buyers have to pay a higher price for each €1 the company has earned over the last year. All else being equal, it’s better to pay a low price — but as Warren Buffett said, ‘It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’
How Growth Rates Impact P/E Ratios
Probably the most important factor in determining what P/E a company trades on is the earnings growth. When earnings grow, the ‘E’ increases, over time. That means even if the current P/E is high, it will reduce over time if the share price stays flat. So while a stock may look expensive based on past earnings, it could be cheap based on future earnings.
Hamburger Hafen und Logistik saw earnings per share decrease by 5.6% last year. But EPS is up 11% over the last 5 years.
How Does Hamburger Hafen und Logistik’s P/E Ratio Compare To Its Peers?
We can get an indication of market expectations by looking at the P/E ratio. The image below shows that Hamburger Hafen und Logistik has a lower P/E than the average (18.4) P/E for companies in the infrastructure industry.
Its relatively low P/E ratio indicates that Hamburger Hafen und Logistik shareholders think it will struggle to do as well as other companies in its industry classification. Since the market seems unimpressed with Hamburger Hafen und Logistik, it’s quite possible it could surprise on the upside. If you consider the stock interesting, further research is recommended. For example, I often monitor director buying and selling.
Remember: P/E Ratios Don’t Consider The Balance Sheet
Don’t forget that the P/E ratio considers market capitalization. That means it doesn’t take debt or cash into account. In theory, a company can lower its future P/E ratio by using cash or debt to invest in growth.