Subdued Growth No Barrier To K. Kythreotis Holdings Public Limited (CSE:KYTH) With Shares Advancing 41%

K. Kythreotis Holdings Public Limited (CSE:KYTH) shares have continued their recent momentum with a 41% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 83%.

Following the firm bounce in price, K. Kythreotis Holdings' price-to-earnings (or "P/E") ratio of 13.9x might make it look like a strong sell right now compared to the market in Cyprus, where around half of the companies have P/E ratios below 7x and even P/E's below 5x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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As an illustration, earnings have deteriorated at K. Kythreotis Holdings over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

See our latest analysis for K. Kythreotis Holdings

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on K. Kythreotis Holdings' earnings, revenue and cash flow.

Is There Enough Growth For K. Kythreotis Holdings?

In order to justify its P/E ratio, K. Kythreotis Holdings would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 12% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 15% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

In contrast to the company, the rest of the market is expected to grow by 20% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

In light of this, it's alarming that K. Kythreotis Holdings' P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

What We Can Learn From K. Kythreotis Holdings' P/E?

K. Kythreotis Holdings' P/E is flying high just like its stock has during the last month. 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.

Our examination of K. Kythreotis Holdings revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It is also worth noting that we have found 3 warning signs for K. Kythreotis Holdings (1 is a bit unpleasant!) that you need to take into consideration.

You might be able to find a better investment than K. Kythreotis Holdings. 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.