There's No Escaping Italian Exhibition Group S.p.A.'s (BIT:IEG) Muted Earnings Despite A 25% Share Price Rise

Despite an already strong run, Italian Exhibition Group S.p.A. (BIT:IEG) shares have been powering on, with a gain of 25% in the last thirty days. The last month tops off a massive increase of 155% in the last year.

In spite of the firm bounce in price, Italian Exhibition Group may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8.6x, since almost half of all companies in Italy have P/E ratios greater than 15x and even P/E's higher than 26x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Italian Exhibition Group 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 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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Does Growth Match The Low P/E?

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

If we review the last year of earnings growth, the company posted a terrific increase of 93%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to climb by 5.4% each year during the coming three years according to the three analysts following the company. Meanwhile, the rest of the market is forecast to expand by 18% per year, which is noticeably more attractive.

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.

What We Can Learn From Italian Exhibition Group's P/E?

Italian Exhibition Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Italian Exhibition Group maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Italian Exhibition Group that you should be aware of.

You might be able to find a better investment than Italian Exhibition Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com