Huber+Suhner AG (VTX:HUBN) Looks Just Right With A 27% Price Jump

Huber+Suhner AG (VTX:HUBN) shares have continued their recent momentum with a 27% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

After such a large jump in price, Huber+Suhner's price-to-earnings (or "P/E") ratio of 34.6x might make it look like a strong sell right now compared to the market in Switzerland, where around half of the companies have P/E ratios below 19x and even P/E's below 14x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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Recent times have been advantageous for Huber+Suhner as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Huber+Suhner

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

Is There Enough Growth For Huber+Suhner?

The only time you'd be truly comfortable seeing a P/E as steep as Huber+Suhner's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 20% gain to the company's bottom line. Still, incredibly EPS has fallen 14% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 15% per annum as estimated by the five 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 Huber+Suhner'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.

The Final Word

The strong share price surge has got Huber+Suhner's P/E rushing to great heights as well. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Huber+Suhner maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Huber+Suhner that you need to be mindful of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.