Arteche Lantegi Elkartea, S.A.'s (BME:ART) 27% Jump Shows Its Popularity With Investors

The Arteche Lantegi Elkartea, S.A. (BME:ART) share price has done very well over the last month, posting an excellent gain of 27%. The last 30 days bring the annual gain to a very sharp 98%.

Following the firm bounce in price, Arteche Lantegi Elkartea may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 26.7x, since almost half of all companies in Spain have P/E ratios under 18x and even P/E's lower than 11x 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.

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With earnings growth that's superior to most other companies of late, Arteche Lantegi Elkartea has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Arteche Lantegi Elkartea

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Does Growth Match The High P/E?

Arteche Lantegi Elkartea's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 77%. Pleasingly, EPS has also lifted 135% 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.

Looking ahead now, EPS is anticipated to climb by 22% during the coming year according to the three analysts following the company. With the market only predicted to deliver 8.4%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Arteche Lantegi Elkartea's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Arteche Lantegi Elkartea's P/E?

Arteche Lantegi Elkartea's P/E is getting right up there since its shares have risen strongly. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Arteche Lantegi Elkartea's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Arteche Lantegi Elkartea with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than Arteche Lantegi Elkartea. 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.