Improved Earnings Required Before Italian Exhibition Group S.p.A. (BIT:IEG) Stock's 27% Jump Looks Justified

Italian Exhibition Group S.p.A. (BIT:IEG) shareholders have had their patience rewarded with a 27% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 80%.

Although its price has surged higher, Italian Exhibition Group may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9.4x, since almost half of all companies in Italy have P/E ratios greater than 16x and even P/E's higher than 27x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

We check all companies for important risks. See what we found for Italian Exhibition Group in our free report.

With earnings growth that's superior to most other companies of late, Italian Exhibition Group has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for Italian Exhibition Group

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

How Is Italian Exhibition Group's Growth Trending?

Italian Exhibition Group's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 32% gain to the company's bottom line. Pleasingly, EPS has also lifted 99% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 1.1% per year over the next three years. With the market predicted to deliver 18% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Italian Exhibition Group's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Italian Exhibition Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Italian Exhibition Group's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Italian Exhibition Group with six simple checks will allow you to discover any risks that could be an issue.

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.