Comet Holding AG (VTX:COTN) Shares Slammed 27% But Getting In Cheap Might Be Difficult Regardless

The Comet Holding AG (VTX:COTN) share price has fared very poorly over the last month, falling by a substantial 27%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 38% share price drop.

Although its price has dipped substantially, given close to half the companies in Switzerland have price-to-earnings ratios (or "P/E's") below 17x, you may still consider Comet Holding as a stock to avoid entirely with its 42.2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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Comet Holding certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Comet Holding

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

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

There's an inherent assumption that a company should far outperform the market for P/E ratios like Comet Holding's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 128% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 48% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 49% per year as estimated by the seven analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 11% each year, which is noticeably less attractive.

With this information, we can see why Comet Holding is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Comet Holding's P/E?

Even after such a strong price drop, Comet Holding's P/E still exceeds the rest of the market significantly. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Comet Holding'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.

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

You might be able to find a better investment than Comet Holding. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.