Market Participants Recognise Lindbergh S.p.A.'s (BIT:LDB) Earnings

When close to half the companies in Italy have price-to-earnings ratios (or "P/E's") below 16x, you may consider Lindbergh S.p.A. (BIT:LDB) as a stock to potentially avoid with its 19.3x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Lindbergh certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Lindbergh

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Lindbergh's earnings, revenue and cash flow.

Does Growth Match The High P/E?

Lindbergh's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered an exceptional 37% gain to the company's bottom line. Pleasingly, EPS has also lifted 109% 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.

This is in contrast to the rest of the market, which is expected to grow by 25% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Lindbergh is trading at such a high P/E compared to the market. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Lindbergh's P/E?

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Lindbergh revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Lindbergh.

You might be able to find a better investment than Lindbergh. 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.