Some Shareholders Feeling Restless Over NTG Nordic Transport Group A/S' (CPH:NTG) P/E Ratio

With a price-to-earnings (or "P/E") ratio of 23.1x NTG Nordic Transport Group A/S (CPH:NTG) may be sending very bearish signals at the moment, given that almost half of all companies in Denmark have P/E ratios under 14x and even P/E's lower than 8x 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 so lofty.

Recent times have been advantageous for NTG Nordic Transport Group as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for NTG Nordic Transport Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on NTG Nordic Transport Group.

How Is NTG Nordic Transport Group's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like NTG Nordic Transport Group's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 178% gain to the company's bottom line. Pleasingly, EPS has also lifted 439% 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.

Turning to the outlook, the next three years should generate growth of 6.4% per annum as estimated by the sole analyst watching the company. Meanwhile, the rest of the market is forecast to expand by 8.4% per year, which is noticeably more attractive.

In light of this, it's alarming that NTG Nordic Transport Group's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On NTG Nordic Transport Group's P/E

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.

Our examination of NTG Nordic Transport Group's analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

We don't want to rain on the parade too much, but we did also find 1 warning sign for NTG Nordic Transport Group that you need to be mindful of.

Of course, you might also be able to find a better stock than NTG Nordic Transport Group. So you may wish to see this free collection of other companies that sit on P/E's below 20x 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.