Market Cool On Eezy Oyj's (HEL:EEZY) Earnings Pushing Shares 26% Lower

Eezy Oyj (HEL:EEZY) shares have had a horrible month, losing 26% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 42% share price drop.

Following the heavy fall in price, Eezy Oyj may be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.2x, since almost half of all companies in Finland have P/E ratios greater than 17x and even P/E's higher than 28x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been advantageous for Eezy Oyj as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 Eezy Oyj

Want the full picture on analyst estimates for the company? Then our free report on Eezy Oyj will help you uncover what's on the horizon.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Eezy Oyj's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 33% last year. Still, incredibly EPS has fallen 71% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 25% per annum as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 13% per annum growth forecast for the broader market.

In light of this, it's peculiar that Eezy Oyj's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Eezy Oyj's P/E has taken a tumble along with its share price. 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.

We've established that Eezy Oyj currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

You always need to take note of risks, for example - Eezy Oyj has 2 warning signs we think you should be aware of.

You might be able to find a better investment than Eezy Oyj. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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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.