Further Upside For Odessos Shiprepair Yard S.A. (BUL:ODES) Shares Could Introduce Price Risks After 26% Bounce

Despite an already strong run, Odessos Shiprepair Yard S.A. (BUL:ODES) shares have been powering on, with a gain of 26% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 72% in the last year.

In spite of the firm bounce in price, given close to half the companies in Bulgaria have price-to-earnings ratios (or "P/E's") above 18x, you may still consider Odessos Shiprepair Yard as an attractive investment with its 8.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's exceedingly strong of late, Odessos Shiprepair Yard has been doing very 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.

Check out our latest analysis for Odessos Shiprepair Yard

Although there are no analyst estimates available for Odessos Shiprepair Yard, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Odessos Shiprepair Yard?

Odessos Shiprepair Yard's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 128% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 222% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 25% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Odessos Shiprepair Yard is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Odessos Shiprepair Yard's P/E

The latest share price surge wasn't enough to lift Odessos Shiprepair Yard's P/E close to the market median. 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.

Our examination of Odessos Shiprepair Yard revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You need to take note of risks, for example - Odessos Shiprepair Yard has 3 warning signs (and 1 which is potentially serious) we think you should know about.

If you're unsure about the strength of Odessos Shiprepair Yard's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. 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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