Tamex Obiekty Sportowe S.A.'s (WSE:TOS) P/E Is Still On The Mark Following 37% Share Price Bounce

Despite an already strong run, Tamex Obiekty Sportowe S.A. (WSE:TOS) shares have been powering on, with a gain of 37% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 40% in the last year.

Since its price has surged higher, Tamex Obiekty Sportowe may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 17.1x, since almost half of all companies in Poland have P/E ratios under 12x and even P/E's lower than 6x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's exceedingly strong of late, Tamex Obiekty Sportowe has been doing very well. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Tamex Obiekty Sportowe

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tamex Obiekty Sportowe will help you shine a light on its historical performance.

How Is Tamex Obiekty Sportowe's Growth Trending?

Tamex Obiekty Sportowe's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered an exceptional 93% gain to the company's bottom line. Pleasingly, EPS has also lifted 144% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 7.8% shows it's noticeably more attractive on an annualised basis.

In light of this, it's understandable that Tamex Obiekty Sportowe's P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Tamex Obiekty Sportowe's P/E

The large bounce in Tamex Obiekty Sportowe's shares has lifted the company's P/E to a fairly high level. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Tamex Obiekty Sportowe maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Tamex Obiekty Sportowe (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.