Why Investors Shouldn't Be Surprised By BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s (FRA:BLH) 30% Share Price Surge

The BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) share price has done very well over the last month, posting an excellent gain of 30%. Looking further back, the 21% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 23x, since almost half of all companies in Germany have P/E ratios under 17x and even P/E's lower than 10x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

With earnings growth that's exceedingly strong of late, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has been doing very well. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-

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 BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s earnings, revenue and cash flow.

Is There Enough Growth For BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-?

In order to justify its P/E ratio, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- would need to produce impressive growth in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 103%. Pleasingly, EPS has also lifted 75% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 18% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- shares have received a push in the right direction, but its P/E is elevated too. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 5 warning signs for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (3 are potentially serious!) that you should be aware of before investing here.

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).

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.

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