Ekobox S.A.'s (WSE:EBX) Price Is Right But Growth Is Lacking After Shares Rocket 33%

Ekobox S.A. (WSE:EBX) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 28%.

In spite of the firm bounce in price, given about half the companies in Poland have price-to-earnings ratios (or "P/E's") above 12x, you may still consider Ekobox as an attractive investment with its 9.2x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Recent times have been quite advantageous for Ekobox as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

Check out our latest analysis for Ekobox

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 Ekobox's earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Ekobox's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 87% last year. Still, incredibly EPS has fallen 3.8% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 18% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

In light of this, it's understandable that Ekobox's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.

The Bottom Line On Ekobox's P/E

The latest share price surge wasn't enough to lift Ekobox's P/E close to the market median. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Ekobox maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 4 warning signs for Ekobox (2 are concerning!) that we have uncovered.

Of course, you might also be able to find a better stock than Ekobox. 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.