Jubilee Metals Group PLC (LON:JLP) Soars 31% But It's A Story Of Risk Vs Reward

Those holding Jubilee Metals Group PLC (LON:JLP) shares would be relieved that the share price has rebounded 31% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that Jubilee Metals Group's price-to-earnings (or "P/E") ratio of 15.7x right now seems quite "middle-of-the-road" compared to the market in the United Kingdom, where the median P/E ratio is around 15x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With earnings that are retreating more than the market's of late, Jubilee Metals Group has been very sluggish. One possibility is that the P/E is moderate because investors think the company's earnings trend will eventually fall in line with most others in the market. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

Check out our latest analysis for Jubilee Metals Group

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

Is There Some Growth For Jubilee Metals Group?

The only time you'd be comfortable seeing a P/E like Jubilee Metals Group's is when the company's growth is tracking the market closely.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 35%. This means it has also seen a slide in earnings over the longer-term as EPS is down 54% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 52% each year as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 12% each year growth forecast for the broader market.

With this information, we find it interesting that Jubilee Metals Group 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.

The Bottom Line On Jubilee Metals Group's P/E

Jubilee Metals Group appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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 Jubilee Metals Group's 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. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Jubilee Metals Group you should know about.

You might be able to find a better investment than Jubilee Metals 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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.