The Market Lifts MT Højgaard Holding A/S (CPH:MTHH) Shares 33% But It Can Do More

MT Højgaard Holding A/S (CPH:MTHH) shares have continued their recent momentum with a 33% gain in the last month alone. The last month tops off a massive increase of 136% in the last year.

In spite of the firm bounce in price, given about half the companies in Denmark have price-to-earnings ratios (or "P/E's") above 15x, you may still consider MT Højgaard Holding as a highly attractive investment with its 5.9x 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.

MT Højgaard Holding has been doing a good job lately as it's been growing earnings at a solid pace. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. 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 out of favour.

See our latest analysis for MT Højgaard Holding

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on MT Højgaard Holding will help you shine a light on its historical performance.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, MT Højgaard Holding would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a decent 9.4% gain to the company's bottom line. The latest three year period has also seen an excellent 554% overall rise in EPS, aided somewhat by its short-term performance. 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 19% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that MT Højgaard Holding is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

MT Højgaard Holding's recent share price jump still sees its P/E sitting firmly flat on the ground. 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.

Our examination of MT Højgaard Holding revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with MT Højgaard Holding.

Of course, you might also be able to find a better stock than MT Højgaard Holding. 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.