CleanSpace Holdings Limited's (ASX:CSX) Shares Leap 25% Yet They're Still Not Telling The Full Story

By
Simply Wall St
Published
October 21, 2021
ASX:CSX
Source: Shutterstock

CleanSpace Holdings Limited (ASX:CSX) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the last month did very little to improve the 77% share price decline over the last year.

Although its price has surged higher, CleanSpace Holdings' price-to-earnings (or "P/E") ratio of 11.4x might still make it look like a buy right now compared to the market in Australia, where around half of the companies have P/E ratios above 20x and even P/E's above 40x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With earnings growth that's superior to most other companies of late, CleanSpace Holdings has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

See our latest analysis for CleanSpace Holdings

pe
ASX:CSX Price Based on Past Earnings October 21st 2021
If you'd like to see what analysts are forecasting going forward, you should check out our free report on CleanSpace Holdings.

How Is CleanSpace Holdings' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as CleanSpace Holdings' is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 72%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

What We Can Learn From CleanSpace Holdings' P/E?

The latest share price surge wasn't enough to lift CleanSpace Holdings' P/E close to the market median. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Before you settle on your opinion, we've discovered 2 warning signs for CleanSpace Holdings (1 can't be ignored!) that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.