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

Despite an already strong run, Kontron AG (ETR:SANT) shares have been powering on, with a gain of 25% in the last thirty days. Looking further back, the 10% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, there still wouldn't be many who think Kontron's price-to-earnings (or "P/E") ratio of 17.5x is worth a mention when the median P/E in Germany is similar at about 17x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With earnings growth that's superior to most other companies of late, Kontron has been doing relatively well. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. 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 not quite in favour.

Check out our latest analysis for Kontron

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

Is There Some Growth For Kontron?

The only time you'd be comfortable seeing a P/E like Kontron's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 432% gain to the company's bottom line. The latest three year period has also seen an excellent 93% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 19% per year during the coming three years according to the seven analysts following the company. That's shaping up to be materially higher than the 16% per year growth forecast for the broader market.

With this information, we find it interesting that Kontron is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

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

Its shares have lifted substantially and now Kontron's P/E is also back up to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Kontron's analyst forecasts revealed that its superior 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 positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Kontron, and understanding should be part of your investment process.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.