Euroconsultants SA (ATH:EUROC) Shares Fly 44% But Investors Aren't Buying For Growth

The Euroconsultants SA (ATH:EUROC) share price has done very well over the last month, posting an excellent gain of 44%. The last month tops off a massive increase of 156% in the last year.

Even after such a large jump in price, Euroconsultants may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9x, since almost half of all companies in Greece have P/E ratios greater than 19x and even P/E's higher than 36x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Recent times have been quite advantageous for Euroconsultants as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Euroconsultants

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Euroconsultants will help you shine a light on its historical performance.

Is There Any Growth For Euroconsultants?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Euroconsultants' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 309% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 22% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Euroconsultants is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Key Takeaway

Even after such a strong price move, Euroconsultants' P/E still trails the rest of the market significantly. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Euroconsultants maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 6 warning signs for Euroconsultants (4 are a bit concerning!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).

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