A Piece Of The Puzzle Missing From YOC AG's (ETR:YOC) 26% Share Price Climb

YOC AG (ETR:YOC) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 21% is also fairly reasonable.

Even after such a large jump in price, it's still not a stretch to say that YOC's price-to-earnings (or "P/E") ratio of 17.1x right now seems quite "middle-of-the-road" compared to the market in Germany, where the median P/E ratio is around 17x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With earnings growth that's superior to most other companies of late, YOC has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for YOC

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

How Is YOC's Growth Trending?

In order to justify its P/E ratio, YOC would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 109% last year. Pleasingly, EPS has also lifted 367% 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 two analysts covering the company suggest earnings should grow by 26% over the next year. That's shaping up to be materially higher than the 20% growth forecast for the broader market.

In light of this, it's curious that YOC's P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From YOC's P/E?

Its shares have lifted substantially and now YOC's P/E is also back up to the market median. 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.

We've established that YOC currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Having said that, be aware YOC is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious.

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.