Keller Group plc (LON:KLR) Stock Catapults 27% Though Its Price And Business Still Lag The Market

Despite an already strong run, Keller Group plc (LON:KLR) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 93%.

Although its price has surged higher, Keller Group's price-to-earnings (or "P/E") ratio of 11.2x might still make it look like a buy right now compared to the market in the United Kingdom, where around half of the companies have P/E ratios above 18x and even P/E's above 31x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Recent times have been advantageous for Keller Group as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Keller Group

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

Is There Any Growth For Keller Group?

In order to justify its P/E ratio, Keller Group would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 94% last year. The strong recent performance means it was also able to grow EPS by 108% 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.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 10% each year over the next three years. With the market predicted to deliver 15% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Keller Group's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Keller Group's P/E

Keller Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Keller Group maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Keller Group with six simple checks.

You might be able to find a better investment than Keller Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (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.