Brunello Cucinelli S.p.A. (BIT:BC) Looks Just Right With A 27% Price Jump

Despite an already strong run, Brunello Cucinelli S.p.A. (BIT:BC) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 34%.

After such a large jump in price, given close to half the companies in Italy have price-to-earnings ratios (or "P/E's") below 14x, you may consider Brunello Cucinelli as a stock to avoid entirely with its 75.5x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Brunello Cucinelli has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Brunello Cucinelli

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Brunello Cucinelli.

How Is Brunello Cucinelli's Growth Trending?

In order to justify its P/E ratio, Brunello Cucinelli would need to produce outstanding growth well in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 20%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 16% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 12% per year, which is noticeably less attractive.

In light of this, it's understandable that Brunello Cucinelli's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Brunello Cucinelli's P/E?

Shares in Brunello Cucinelli have built up some good momentum lately, which has really inflated its P/E. 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 Brunello Cucinelli maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Brunello Cucinelli with six simple checks on some of these key factors.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.