A Piece Of The Puzzle Missing From Panoro Energy ASA's (OB:PEN) 25% Share Price Climb

Panoro Energy ASA (OB:PEN) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 31%.

In spite of the firm bounce in price, it's still not a stretch to say that Panoro Energy's price-to-earnings (or "P/E") ratio of 11.6x right now seems quite "middle-of-the-road" compared to the market in Norway, where the median P/E ratio is around 12x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Panoro Energy certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

See our latest analysis for Panoro Energy

Keen to find out how analysts think Panoro Energy's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Panoro Energy's Growth Trending?

The only time you'd be comfortable seeing a P/E like Panoro Energy's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 75%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 37% each year as estimated by the six analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 27% per year, which is noticeably less attractive.

In light of this, it's curious that Panoro Energy's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Panoro Energy's P/E

Panoro Energy's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

We've established that Panoro Energy currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for Panoro Energy that you need to take into consideration.

If these risks are making you reconsider your opinion on Panoro Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.