There's No Escaping Astarta Holding PLC's (WSE:AST) Muted Earnings Despite A 29% Share Price Rise

Despite an already strong run, Astarta Holding PLC (WSE:AST) shares have been powering on, with a gain of 29% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 69% in the last year.

In spite of the firm bounce in price, Astarta Holding may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.7x, since almost half of all companies in Poland have P/E ratios greater than 12x and even P/E's higher than 22x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Astarta Holding 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 that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Astarta Holding

Although there are no analyst estimates available for Astarta Holding, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Astarta Holding?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Astarta Holding's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 49% gain to the company's bottom line. Still, incredibly EPS has fallen 7.6% 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.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 14% shows it's an unpleasant look.

With this information, we are not surprised that Astarta Holding is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.

The Bottom Line On Astarta Holding's P/E

Astarta Holding's recent share price jump still sees its P/E sitting firmly flat on the ground. 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.

As we suspected, our examination of Astarta Holding revealed its shrinking earnings over the medium-term are contributing to its low P/E, given the market is set to grow. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for Astarta Holding 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.