LC Spólka Akcyjna (WSE:APL) Stock Rockets 25% But Many Are Still Ignoring The Company

LC Spólka Akcyjna (WSE:APL) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 8.2% isn't as impressive.

Even after such a large jump in price, given about half the companies in Poland have price-to-earnings ratios (or "P/E's") above 12x, you may still consider LC Spólka Akcyjna as a highly attractive investment with its 3.4x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

LC Spólka Akcyjna certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for LC Spólka Akcyjna

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 LC Spólka Akcyjna's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

There's an inherent assumption that a company should far underperform the market for P/E ratios like LC Spólka Akcyjna's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 284% gain to the company's bottom line. The latest three year period has also seen an excellent 2,087% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 14% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that LC Spólka Akcyjna's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

LC Spólka Akcyjna'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.

We've established that LC Spólka Akcyjna currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 4 warning signs for LC Spólka Akcyjna (3 are a bit concerning!) that you should be aware of.

Of course, you might also be able to find a better stock than LC Spólka Akcyjna. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.