R&S Group Holding AG (VTX:RSGN) Stock Rockets 25% But Many Are Still Ignoring The Company

R&S Group Holding AG (VTX:RSGN) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 96%.

Even after such a large jump in price, it's still not a stretch to say that R&S Group Holding's price-to-earnings (or "P/E") ratio of 19.2x right now seems quite "middle-of-the-road" compared to the market in Switzerland, where the median P/E ratio is around 20x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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R&S Group Holding certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for R&S Group Holding

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

Is There Some Growth For R&S Group Holding?

There's an inherent assumption that a company should be matching the market for P/E ratios like R&S Group Holding's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 226% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 14% each year over the next three years. With the market only predicted to deliver 10% per year, the company is positioned for a stronger earnings result.

In light of this, it's curious that R&S Group Holding's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now R&S Group Holding's P/E is also back up to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that R&S Group Holding currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with R&S Group Holding (at least 2 which can't be ignored), and understanding these should be part of your investment process.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.