Cautious Investors Not Rewarding Vinci Partners Investments Ltd.'s (NASDAQ:VINP) Performance Completely

There wouldn't be many who think Vinci Partners Investments Ltd.'s (NASDAQ:VINP) price-to-earnings (or "P/E") ratio of 14.6x is worth a mention when the median P/E in the United States is similar at about 15x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Vinci Partners Investments could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Vinci Partners Investments

Keen to find out how analysts think Vinci Partners Investments' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Vinci Partners Investments' Growth Trending?

In order to justify its P/E ratio, Vinci Partners Investments would need to produce growth that's similar to the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 72%. The last three years don't look nice either as the company has shrunk EPS by 77% 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 five analysts covering the company suggest earnings should grow by 39% over the next year. That's shaping up to be materially higher than the 7.4% growth forecast for the broader market.

With this information, we find it interesting that Vinci Partners Investments is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Vinci Partners Investments' P/E?

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Vinci Partners Investments currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Vinci Partners Investments (1 makes us a bit uncomfortable) you should be aware of.

You might be able to find a better investment than Vinci Partners Investments. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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