KONCAR - Elektroindustrija d.d.'s (ZGSE:KOEI) Share Price Boosted 25% But Its Business Prospects Need A Lift Too

Despite an already strong run, KONCAR - Elektroindustrija d.d. (ZGSE:KOEI) shares have been powering on, with a gain of 25% in the last thirty days. The last 30 days bring the annual gain to a very sharp 92%.

Although its price has surged higher, KONCAR - Elektroindustrija d.d may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 12.2x, since almost half of all companies in Croatia have P/E ratios greater than 15x and even P/E's higher than 24x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

KONCAR - Elektroindustrija d.d certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for KONCAR - Elektroindustrija d.d

Want the full picture on analyst estimates for the company? Then our free report on KONCAR - Elektroindustrija d.d will help you uncover what's on the horizon.

Is There Any Growth For KONCAR - Elektroindustrija d.d?

In order to justify its P/E ratio, KONCAR - Elektroindustrija d.d would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 110% gain to the company's bottom line. The latest three year period has also seen an excellent 336% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 13% per annum during the coming three years according to the one analyst following the company. Meanwhile, the rest of the market is forecast to expand by 15% per annum, which is noticeably more attractive.

In light of this, it's understandable that KONCAR - Elektroindustrija d.d's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Despite KONCAR - Elektroindustrija d.d's shares building up a head of steam, its P/E still lags most other companies. 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.

As we suspected, our examination of KONCAR - Elektroindustrija d.d's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for KONCAR - Elektroindustrija d.d with six simple checks will allow you to discover any risks that could be an issue.

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

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.