flatexDEGIRO AG (ETR:FTK) Stock Rockets 25% But Many Are Still Ignoring The Company

The flatexDEGIRO AG (ETR:FTK) share price has done very well over the last month, posting an excellent gain of 25%. The last 30 days bring the annual gain to a very sharp 33%.

Although its price has surged higher, flatexDEGIRO may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.7x, since almost half of all companies in Germany have P/E ratios greater than 18x and even P/E's higher than 32x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, flatexDEGIRO has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for flatexDEGIRO

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How Is flatexDEGIRO's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like flatexDEGIRO's to be considered reasonable.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.2% last year. This was backed up an excellent period prior to see EPS up by 62% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 12% each year during the coming three years according to the ten analysts following the company. That's shaping up to be similar to the 13% per year growth forecast for the broader market.

With this information, we find it odd that flatexDEGIRO is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

flatexDEGIRO's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 flatexDEGIRO's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with flatexDEGIRO.

If these risks are making you reconsider your opinion on flatexDEGIRO, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.