Investors Still Aren't Entirely Convinced By Ilyda SA's (ATH:ILYDA) Earnings Despite 28% Price Jump

Despite an already strong run, Ilyda SA (ATH:ILYDA) shares have been powering on, with a gain of 28% in the last thirty days. The annual gain comes to 161% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, Ilyda's price-to-earnings (or "P/E") ratio of 10.4x might still make it look like a buy right now compared to the market in Greece, where around half of the companies have P/E ratios above 15x and even P/E's above 23x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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Recent times have been quite advantageous for Ilyda as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Ilyda

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

What Are Growth Metrics Telling Us About The Low P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 203% last year. The latest three year period has also seen an excellent 708% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 11% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that Ilyda's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

The latest share price surge wasn't enough to lift Ilyda's P/E close to the market median. 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.

Our examination of Ilyda revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 4 warning signs for Ilyda you should be aware of, and 2 of them don't sit too well with us.

If you're unsure about the strength of Ilyda's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.