Some Caspar Asset Management S.A. (WSE:CSR) Shareholders Look For Exit As Shares Take 31% Pounding

The Caspar Asset Management S.A. (WSE:CSR) share price has fared very poorly over the last month, falling by a substantial 31%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 53% loss during that time.

Although its price has dipped substantially, Caspar Asset Management may still be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 18.2x, since almost half of all companies in Poland have P/E ratios under 13x and even P/E's lower than 8x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

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Caspar Asset Management has been doing a good job lately as it's been growing earnings at a solid pace. It might be that many expect the respectable earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Caspar Asset Management

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 Caspar Asset Management's earnings, revenue and cash flow.

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

In order to justify its P/E ratio, Caspar Asset Management would need to produce impressive growth in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 22%. However, this wasn't enough as the latest three year period has seen a very unpleasant 73% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

In contrast to the company, the rest of the market is expected to grow by 18% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

With this information, we find it concerning that Caspar Asset Management is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

What We Can Learn From Caspar Asset Management's P/E?

Caspar Asset Management's P/E hasn't come down all the way after its stock plunged. 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 Caspar Asset Management currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It is also worth noting that we have found 4 warning signs for Caspar Asset Management (1 doesn't sit too well with us!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.