Transense Technologies plc (LON:TRT) Stock Rockets 37% But Many Are Still Ignoring The Company

Transense Technologies plc (LON:TRT) shares have had a really impressive month, gaining 37% after a shaky period beforehand. But not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 38% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Transense Technologies' price-to-earnings (or "P/E") ratio of 13.1x is worth a mention when the median P/E in the United Kingdom is similar at about 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been advantageous for Transense Technologies as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Transense Technologies

Keen to find out how analysts think Transense Technologies' 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 P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like Transense Technologies' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 460% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 47% as estimated by the sole analyst watching the company. With the market only predicted to deliver 7.6%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that Transense Technologies is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Transense Technologies' P/E?

Its shares have lifted substantially and now Transense Technologies' P/E is also back up to the market median. 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.

Our examination of Transense Technologies' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

It is also worth noting that we have found 4 warning signs for Transense Technologies (1 doesn't sit too well with us!) that you need to take into consideration.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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.