Investors Still Aren't Entirely Convinced By Cliq Digital AG's (ETR:CLIQ) Earnings Despite 33% Price Jump

Cliq Digital AG (ETR:CLIQ) shareholders are no doubt pleased to see that the share price has bounced 33% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 73% share price drop in the last twelve months.

Although its price has surged higher, given about half the companies in Germany have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Cliq Digital as a highly attractive investment with its 3.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Cliq Digital could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Cliq Digital

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

What Are Growth Metrics Telling Us About The Low P/E?

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

Retrospectively, the last year delivered a frustrating 73% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 36% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 28% during the coming year according to the three analysts following the company. With the market only predicted to deliver 21%, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Cliq Digital's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Cliq Digital's P/E

Even after such a strong price move, Cliq Digital's P/E still trails the rest of the market significantly. 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 Cliq Digital currently trades on a much 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 significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Cliq Digital that you need to be mindful of.

If you're unsure about the strength of Cliq Digital's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.