What Is Iktinos Hellas Greek Marble Industry Technical and Touristic's (ATH:IKTIN) P/E Ratio After Its Share Price Rocketed?

The Iktinos Hellas Greek Marble Industry Technical and Touristic (ATH:IKTIN) share price has done well in the last month, posting a gain of 264%. Zooming out, the annual gain of 247% knocks our socks off.

All else being equal, a sharp share price increase should make a stock less attractive to potential investors. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. The implication here is that deep value investors might steer clear when expectations of a company are too high. One way to gauge market expectations of a stock is to look at its Price to Earnings Ratio (PE Ratio). A high P/E ratio means that investors have a high expectation about future growth, while a low P/E ratio means they have low expectations about future growth.

Check out our latest analysis for Iktinos Hellas Greek Marble Industry Technical and Touristic

How Does Iktinos Hellas Greek Marble Industry Technical and Touristic's P/E Ratio Compare To Its Peers?

We can tell from its P/E ratio of 8.47 that sentiment around Iktinos Hellas Greek Marble Industry Technical and Touristic isn't particularly high. The image below shows that Iktinos Hellas Greek Marble Industry Technical and Touristic has a lower P/E than the average (9.9) P/E for companies in the metals and mining industry.

Its relatively low P/E ratio indicates that Iktinos Hellas Greek Marble Industry Technical and Touristic shareholders think it will struggle to do as well as other companies in its industry classification.

How Growth Rates Impact P/E Ratios

P/E ratios primarily reflect market expectations around earnings growth rates. If earnings are growing quickly, then the 'E' in the equation will increase faster than it would otherwise. That means unless the share price increases, the P/E will reduce in a few years. So while a stock may look expensive based on past earnings, it could be cheap based on future earnings.

In the last year, Iktinos Hellas Greek Marble Industry Technical and Touristic grew EPS like Taylor Swift grew her fan base back in 2010; the 84% gain was both fast and well deserved. The sweetener is that the annual five year growth rate of 33% is also impressive. So I'd be surprised if the P/E ratio was not above average.

A Limitation: P/E Ratios Ignore Debt and Cash In The Bank

The 'Price' in P/E reflects the market capitalization of the company. That means it doesn't take debt or cash into account. Hypothetically, a company could reduce its future P/E ratio by spending its cash (or taking on debt) to achieve higher earnings.

While growth expenditure doesn't always pay off, the point is that it is a good option to have; but one that the P/E ratio ignores.

Is Debt Impacting Iktinos Hellas Greek Marble Industry Technical and Touristic's P/E?

Net debt totals 94% of Iktinos Hellas Greek Marble Industry Technical and Touristic's market cap. This is enough debt that you'd have to make some adjustments before using the P/E ratio to compare it to a company with net cash.

The Bottom Line On Iktinos Hellas Greek Marble Industry Technical and Touristic's P/E Ratio

Iktinos Hellas Greek Marble Industry Technical and Touristic's P/E is 8.5 which is below average (17.2) in the GR market. The company has a meaningful amount of debt on the balance sheet, but that should not eclipse the solid earnings growth. If the company can continue to grow earnings, then the current P/E may be unjustifiably low. What is very clear is that the market has become significantly less pessimistic about Iktinos Hellas Greek Marble Industry Technical and Touristic over the last month, with the P/E ratio rising from 2.3 back then to 8.5 today. For those who like to invest in turnarounds, that might mean it's time to put the stock on a watchlist, or research it. But others might consider the opportunity to have passed.

Investors should be looking to buy stocks that the market is wrong about. If the reality for a company is not as bad as the P/E ratio indicates, then the share price should increase as the market realizes this. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

But note: Iktinos Hellas Greek Marble Industry Technical and Touristic may not be the best stock to buy. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20).

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.