Positive Sentiment Still Eludes ALTUS SA (WSE:ALI) Following 27% Share Price Slump

ALTUS SA (WSE:ALI) shares have had a horrible month, losing 27% after a relatively good period beforehand. Looking at the bigger picture, even after this poor month the stock is up 76% in the last year.

Following the heavy fall in price, ALTUS' price-to-earnings (or "P/E") ratio of 9.3x might make it look like a buy right now compared to the market in Poland, where around half of the companies have P/E ratios above 12x and even P/E's above 24x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

ALTUS 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.

Check out our latest analysis for ALTUS

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

How Is ALTUS' Growth Trending?

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

If we review the last year of earnings growth, the company posted a terrific increase of 208%. The strong recent performance means it was also able to grow EPS by 2,828% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 7.8% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that ALTUS' 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.

What We Can Learn From ALTUS' P/E?

The softening of ALTUS' shares means its P/E is now sitting at a pretty low level. 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.

Our examination of ALTUS revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. 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.

You should always think about risks. Case in point, we've spotted 4 warning signs for ALTUS you should be aware of, and 3 of them are significant.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.