There's Reason For Concern Over Ekopol Górnoslaski Holding S.A.'s (WSE:EGH) Price

There wouldn't be many who think Ekopol Górnoslaski Holding S.A.'s (WSE:EGH) price-to-earnings (or "P/E") ratio of 13.5x is worth a mention when the median P/E in Poland is similar at about 13x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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Recent times have been quite advantageous for Ekopol Górnoslaski Holding as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Ekopol Górnoslaski Holding

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 Ekopol Górnoslaski Holding's earnings, revenue and cash flow.

Is There Some Growth For Ekopol Górnoslaski Holding?

The only time you'd be comfortable seeing a P/E like Ekopol Górnoslaski Holding'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 38%. Still, incredibly EPS has fallen 74% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 12% 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 somewhat alarming that Ekopol Górnoslaski Holding's P/E sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh on the share price eventually.

What We Can Learn From Ekopol Górnoslaski Holding's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Ekopol Górnoslaski Holding currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Ekopol Górnoslaski Holding (2 shouldn't be ignored!) that you should be aware of before investing here.

You might be able to find a better investment than Ekopol Górnoslaski Holding. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.