Vistry Group PLC's (LON:VTY) 27% Jump Shows Its Popularity With Investors

Vistry Group PLC (LON:VTY) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 50% in the last twelve months.

After such a large jump in price, Vistry Group may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 28.5x, since almost half of all companies in the United Kingdom have P/E ratios under 15x and even P/E's lower than 9x are not unusual. 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 2 warning signs investors should be aware of before investing in Vistry Group. Read for free now.

Vistry Group hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour 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.

Check out our latest analysis for Vistry Group

Keen to find out how analysts think Vistry Group'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 Vistry Group's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a frustrating 65% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 80% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 54% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 16% per annum, which is noticeably less attractive.

In light of this, it's understandable that Vistry Group'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.

What We Can Learn From Vistry Group's P/E?

The strong share price surge has got Vistry Group's P/E rushing to great heights as well. 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.

We've established that Vistry Group 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. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Vistry Group that you should be aware of.

If these risks are making you reconsider your opinion on Vistry Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.