Published on 14 Jul 2023 on Simply Wall St. via Yahoo Finance

Why Investors Shouldn't Be Surprised By Eneco Refresh Limited's (ASX:ERG) 32% Share Price Plunge

Eneco Refresh Limited (ASX:ERG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 32% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 38% in that time.

After such a large drop in price, Eneco Refresh's price-to-earnings (or "P/E") ratio of -6x might make it look like a strong buy right now compared to the market in Australia, where around half of the companies have P/E ratios above 17x and even P/E's above 34x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

For example, consider that Eneco Refresh's financial performance has been pretty ordinary lately as earnings growth is non-existent. One possibility is that the P/E is low because investors think this benign earnings growth rate will likely underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.