This article is for investors who would like to improve their understanding of price to earnings ratios (P/E ratios). We'll look at As Commercial Industrial Company of Computers and Toys S.A.'s (ATH:ASCO) P/E ratio and reflect on what it tells us about the company's share price. What is As Commercial Industrial Company of Computers and Toys's P/E ratio? Well, based on the last twelve months it is 12.54. That corresponds to an earnings yield of approximately 8.0%.
See our latest analysis for As Commercial Industrial Company of Computers and Toys
How Do You Calculate A P/E Ratio?
The formula for P/E is:
Price to Earnings Ratio = Share Price ÷ Earnings per Share (EPS)
Or for As Commercial Industrial Company of Computers and Toys:
P/E of 12.54 = €2.92 ÷ €0.23 (Based on the trailing twelve months to June 2019.)
Is A High Price-to-Earnings 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. That isn't necessarily good or bad, but a high P/E implies relatively high expectations of what a company can achieve in the future.
Does As Commercial Industrial Company of Computers and Toys Have A Relatively High Or Low P/E For Its Industry?
The P/E ratio indicates whether the market has higher or lower expectations of a company. If you look at the image below, you can see As Commercial Industrial Company of Computers and Toys has a lower P/E than the average (16.2) in the leisure industry classification.
Its relatively low P/E ratio indicates that As Commercial Industrial Company of Computers and Toys shareholders think it will struggle to do as well as other companies in its industry classification. Since the market seems unimpressed with As Commercial Industrial Company of Computers and Toys, it's quite possible it could surprise on the upside. It is arguably worth checking if insiders are buying shares, because that might imply they believe the stock is undervalued.
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. That means unless the share price increases, the P/E will reduce in a few years. And as that P/E ratio drops, the company will look cheap, unless its share price increases.
As Commercial Industrial Company of Computers and Toys's earnings per share fell by 16% in the last twelve months. But it has grown its earnings per share by 19% per year over the last five years.