NWAI Dom Maklerski S.A.'s (WSE:NWA) Shares Bounce 27% But Its Business Still Trails The Market

NWAI Dom Maklerski S.A. (WSE:NWA) shareholders have had their patience rewarded with a 27% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 10% in the last twelve months.

Although its price has surged higher, NWAI Dom Maklerski may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8.5x, since almost half of all companies in Poland have P/E ratios greater than 13x and even P/E's higher than 28x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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For instance, NWAI Dom Maklerski's receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

See our latest analysis for NWAI Dom Maklerski

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 NWAI Dom Maklerski's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 14%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

This is in contrast to the rest of the market, which is expected to grow by 13% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why NWAI Dom Maklerski is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

NWAI Dom Maklerski's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

As we suspected, our examination of NWAI Dom Maklerski revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. 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 rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for NWAI Dom Maklerski that you should be aware of.

If these risks are making you reconsider your opinion on NWAI Dom Maklerski, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.