Kinepolis Group NV (EBR:KIN) Not Flying Under The Radar

When close to half the companies in Belgium have price-to-earnings ratios (or "P/E's") below 12x, you may consider Kinepolis Group NV (EBR:KIN) as a stock to avoid entirely with its 29.9x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Kinepolis Group has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Kinepolis Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Kinepolis Group.

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, Kinepolis Group would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 32% gain to the company's bottom line. Pleasingly, EPS has also lifted 554% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 32% per annum as estimated by the four analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 11% per year, which is noticeably less attractive.

In light of this, it's understandable that Kinepolis Group's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Kinepolis Group's P/E?

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.

As we suspected, our examination of Kinepolis Group's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Kinepolis Group that you should be aware of.

Of course, you might also be able to find a better stock than Kinepolis Group. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.