Springer Nature AG & Co. KGaA's (ETR:SPG) Share Price Is Still Matching Investor Opinion Despite 26% Slump

Unfortunately for some shareholders, the Springer Nature AG & Co. KGaA (ETR:SPG) share price has dived 26% in the last thirty days, prolonging recent pain. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Although its price has dipped substantially, given close to half the companies in Germany have price-to-earnings ratios (or "P/E's") below 17x, you may still consider Springer Nature KGaA as a stock to avoid entirely with its 50.8x P/E ratio. 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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Recent times have been advantageous for Springer Nature KGaA as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Springer Nature KGaA

Want the full picture on analyst estimates for the company? Then our free report on Springer Nature KGaA will help you uncover what's on the horizon.

Is There Enough Growth For Springer Nature KGaA?

Springer Nature KGaA's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 321%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 60% per year during the coming three years according to the six analysts following the company. With the market only predicted to deliver 15% per annum, the company is positioned for a stronger earnings result.

With this information, we can see why Springer Nature KGaA 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 Springer Nature KGaA's P/E?

Springer Nature KGaA's shares may have retreated, but its P/E is still flying high. 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.

We've established that Springer Nature KGaA maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Springer Nature KGaA is showing 1 warning sign in our investment analysis, you should know about.

Of course, you might also be able to find a better stock than Springer Nature KGaA. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.