Boreo Oyj (HEL:BOREO) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

Unfortunately for some shareholders, the Boreo Oyj (HEL:BOREO) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Although its price has dipped substantially, Boreo Oyj's price-to-earnings (or "P/E") ratio of 50x might still make it look like a strong sell right now compared to the market in Finland, where around half of the companies have P/E ratios below 17x and even P/E's below 12x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

With earnings that are retreating more than the market's of late, Boreo Oyj has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Boreo Oyj

Keen to find out how analysts think Boreo Oyj's future stacks up against the industry? In that case, our free report is a great place to start.

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 Boreo Oyj's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 70%. As a result, earnings from three years ago have also fallen 79% overall. 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 62% each year during the coming three years according to the sole analyst following the company. That's shaping up to be materially higher than the 13% per year growth forecast for the broader market.

With this information, we can see why Boreo Oyj is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Boreo Oyj's P/E?

A significant share price dive has done very little to deflate Boreo Oyj's very lofty P/E. 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.

As we suspected, our examination of Boreo Oyj's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

Plus, you should also learn about these 4 warning signs we've spotted with Boreo Oyj (including 1 which is potentially serious).

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.