Qt Group Oyj (HEL:QTCOM) Stocks Pounded By 25% But Not Lagging Market On Growth Or Pricing

Qt Group Oyj (HEL:QTCOM) shares have had a horrible month, losing 25% after a relatively good period beforehand. Longer-term, the stock has been solid despite a difficult 30 days, gaining 17% in the last year.

In spite of the heavy fall in price, Qt Group Oyj may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 39.1x, since almost half of all companies in Finland have P/E ratios under 18x and even P/E's lower than 13x 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.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Qt Group Oyj has been doing quite well of late. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Qt Group Oyj

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

What Are Growth Metrics Telling Us About The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Qt Group Oyj's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 37% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 109% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 26% each year as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 14% per year growth forecast for the broader market.

In light of this, it's understandable that Qt Group 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 Final Word

A significant share price dive has done very little to deflate Qt Group Oyj's very lofty P/E. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Qt Group Oyj'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.

You need to take note of risks, for example - Qt Group Oyj has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.