There's No Escaping Fast Finance24 Holding AG's (FRA:FF24) Muted Earnings Despite A 64% Share Price Rise

Despite an already strong run, Fast Finance24 Holding AG (FRA:FF24) shares have been powering on, with a gain of 64% in the last thirty days. Notwithstanding the latest gain, the annual share price return of 7.3% isn't as impressive.

In spite of the firm bounce in price, Fast Finance24 Holding's price-to-earnings (or "P/E") ratio of 2.5x might still make it look like a strong buy right now compared to the market in Germany, where around half of the companies have P/E ratios above 19x and even P/E's above 35x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

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With earnings growth that's exceedingly strong of late, Fast Finance24 Holding has been doing very 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.

View our latest analysis for Fast Finance24 Holding

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 Fast Finance24 Holding's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

Fast Finance24 Holding's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 157% last year. The strong recent performance means it was also able to grow EPS by 56% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 25% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Fast Finance24 Holding is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Key Takeaway

Shares in Fast Finance24 Holding are going to need a lot more upward momentum to get the company's P/E out of its slump. 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.

We've established that Fast Finance24 Holding maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for Fast Finance24 Holding that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.