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Unfortunately for some shareholders, the Interregional Distribution Grid Company of Center and Volga Region (MCX:MRKP) share price has dived 33% in the last thirty days. Indeed the recent decline has arguably caused some bitterness for shareholders who have held through the 43% drop over twelve months.
All else being equal, a share price drop should make a stock more attractive to potential investors. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. So, on certain occasions, long term focussed investors try to take advantage of pessimistic expectations to buy shares at a better price. 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.
See our latest analysis for Interregional Distribution Grid Company of Center and Volga Region
How Does Interregional Distribution Grid Company of Center and Volga Region's P/E Ratio Compare To Its Peers?
We can tell from its P/E ratio of 2.46 that sentiment around Interregional Distribution Grid Company of Center and Volga Region isn't particularly high. We can see in the image below that the average P/E (6.5) for companies in the electric utilities industry is higher than Interregional Distribution Grid Company of Center and Volga Region's P/E.
Its relatively low P/E ratio indicates that Interregional Distribution Grid Company of Center and Volga Region shareholders think it will struggle to do as well as other companies in its industry classification. Since the market seems unimpressed with Interregional Distribution Grid Company of Center and Volga Region, 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. Then, a lower P/E should attract more buyers, pushing the share price up.
Interregional Distribution Grid Company of Center and Volga Region saw earnings per share decrease by 48% last year. But over the longer term (3 years), earnings per share have increased by 25%.