Italian Exhibition Group S.p.A. (BIT:IEG) Stock Catapults 28% Though Its Price And Business Still Lag The Market

Despite an already strong run, Italian Exhibition Group S.p.A. (BIT:IEG) shares have been powering on, with a gain of 28% in the last thirty days. The last 30 days bring the annual gain to a very sharp 54%.

In spite of the firm bounce in price, Italian Exhibition Group may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6.9x, since almost half of all companies in Italy have P/E ratios greater than 16x and even P/E's higher than 28x are not unusual. However, the P/E might be quite low 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, Italian Exhibition Group has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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.

See our latest analysis for Italian Exhibition Group

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Is There Any Growth For Italian Exhibition Group?

In order to justify its P/E ratio, Italian Exhibition Group would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 55%. The latest three year period has also seen an excellent 196% 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.

Shifting to the future, estimates from the three analysts covering the company suggest earnings growth is heading into negative territory, declining 2.2% over the next year. Meanwhile, the broader market is forecast to expand by 18%, which paints a poor picture.

With this information, we are not surprised that Italian Exhibition Group is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

Italian Exhibition Group's recent share price jump still sees its P/E sitting firmly flat on the ground. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Italian Exhibition Group's analyst forecasts revealed that its outlook for shrinking earnings 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 2 warning signs for Italian Exhibition Group that you should be aware of.

If you're unsure about the strength of Italian Exhibition Group'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.