LINK Mobility Group Holding ASA's (OB:LINK) P/E Is On The Mark

Explore LINK Mobility Group Holding's Fair Values from the Community and select yours

With a price-to-earnings (or "P/E") ratio of 59.3x LINK Mobility Group Holding ASA (OB:LINK) may be sending very bearish signals at the moment, given that almost half of all companies in Norway have P/E ratios under 13x and even P/E's lower than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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With earnings growth that's superior to most other companies of late, LINK Mobility Group Holding has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

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Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as LINK Mobility Group Holding's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 60% gain to the company's bottom line. 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.

Turning to the outlook, the next three years should generate growth of 46% each year as estimated by the four analysts watching the company. With the market only predicted to deliver 19% per year, the company is positioned for a stronger earnings result.

With this information, we can see why LINK Mobility Group Holding is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On LINK Mobility Group Holding'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 LINK Mobility Group Holding's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for LINK Mobility Group Holding that you need to be mindful of.

If you're unsure about the strength of LINK Mobility Group Holding'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.