Siegfried Holding AG's (VTX:SFZN) Business Is Yet to Catch Up With Its Share Price

With a price-to-earnings (or "P/E") ratio of 24.8x Siegfried Holding AG (VTX:SFZN) may be sending bearish signals at the moment, given that almost half of all companies in Switzerland have P/E ratios under 17x and even P/E's lower than 12x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

Recent times have been advantageous for Siegfried Holding 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.

See our latest analysis for Siegfried Holding

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

How Is Siegfried Holding's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Siegfried Holding's is when the company's growth is on track to outshine the market.

If we review the last year of earnings growth, the company posted a terrific increase of 16%. The latest three year period has also seen an excellent 238% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 7.1% each year as estimated by the ten analysts watching the company. With the market predicted to deliver 8.4% growth each year, the company is positioned for a comparable earnings result.

In light of this, it's curious that Siegfried Holding's P/E sits above the majority of other companies. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of earnings growth is likely to weigh down the share price eventually.

The Final Word

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 Siegfried Holding's analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Siegfried Holding you should know about.

If you're unsure about the strength of Siegfried Holding'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. 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.