Earnings Tell The Story For flatexDEGIRO AG (ETR:FTK)

Explore flatexDEGIRO's Fair Values from the Community and select yours

When close to half the companies in Germany have price-to-earnings ratios (or "P/E's") below 19x, you may consider flatexDEGIRO AG (ETR:FTK) as a stock to potentially avoid with its 27.1x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

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Recent times have been advantageous for flatexDEGIRO 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for flatexDEGIRO

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

Is There Enough Growth For flatexDEGIRO?

The only time you'd be truly comfortable seeing a P/E as high as flatexDEGIRO'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 56%. Pleasingly, EPS has also lifted 122% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 21% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 17% each year, which is noticeably less attractive.

In light of this, it's understandable that flatexDEGIRO'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 Bottom Line On flatexDEGIRO's P/E

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.

As we suspected, our examination of flatexDEGIRO'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. Unless these conditions change, they will continue to provide strong support to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for flatexDEGIRO with six simple checks will allow you to discover any risks that could be an issue.

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.