Investors Appear Satisfied With Verkkokauppa.com Oyj's (HEL:VERK) Prospects As Shares Rocket 29%

Verkkokauppa.com Oyj (HEL:VERK) shares have continued their recent momentum with a 29% gain in the last month alone. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

After such a large jump in price, given close to half the companies in Finland have price-to-earnings ratios (or "P/E's") below 19x, you may consider Verkkokauppa.com Oyj as a stock to avoid entirely with its 53.4x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 1 warning sign investors should be aware of before investing in Verkkokauppa.com Oyj. Read for free now.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Verkkokauppa.com Oyj has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Verkkokauppa.com Oyj

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Verkkokauppa.com Oyj.

Is There Enough Growth For Verkkokauppa.com Oyj?

In order to justify its P/E ratio, Verkkokauppa.com Oyj would need to produce outstanding growth well in excess of the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 44% last year. Still, incredibly EPS has fallen 81% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 52% each year during the coming three years according to the three analysts following the company. That's shaping up to be materially higher than the 15% per annum growth forecast for the broader market.

In light of this, it's understandable that Verkkokauppa.com Oyj'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.

The Bottom Line On Verkkokauppa.com Oyj's P/E

The strong share price surge has got Verkkokauppa.com Oyj's P/E rushing to great heights as well. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Verkkokauppa.com Oyj maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Verkkokauppa.com Oyj that you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.