Atrem S.A. (WSE:ATR) Stock Rockets 87% But Many Are Still Ignoring The Company

Atrem S.A. (WSE:ATR) shareholders would be excited to see that the share price has had a great month, posting a 87% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 51% in the last year.

Even after such a large jump in price, Atrem may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6.1x, since almost half of all companies in Poland have P/E ratios greater than 11x and even P/E's higher than 23x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Atrem certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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 Atrem

Although there are no analyst estimates available for Atrem, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Does Growth Match The Low P/E?

Atrem's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 160%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

In contrast to the company, the rest of the market is expected to decline by 1.4% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

With this information, we find it very odd that Atrem is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

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

Atrem's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Atrem revealed its growing earnings over the medium-term aren't contributing to its P/E anywhere near as much as we would have predicted, given the market is set to shrink. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. One major risk is whether its earnings trajectory can keep outperforming under these tough market conditions. It appears many are indeed anticipating earnings instability, because this relative performance should normally provide a boost to the share price.

Before you take the next step, you should know about the 2 warning signs for Atrem (1 is potentially serious!) that we have uncovered.

If you're unsure about the strength of Atrem'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.