Further Upside For Tarczynski S.A. (WSE:TAR) Shares Could Introduce Price Risks After 28% Bounce

Tarczynski S.A. (WSE:TAR) shares have continued their recent momentum with a 28% gain in the last month alone. The last month tops off a massive increase of 194% in the last year.

Even after such a large jump in price, Tarczynski's price-to-earnings (or "P/E") ratio of 8.3x might still 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 11x and even P/E's above 20x 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.

Recent times have been quite advantageous for Tarczynski as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

View our latest analysis for Tarczynski

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 Tarczynski's earnings, revenue and cash flow.

Is There Any Growth For Tarczynski?

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

If we review the last year of earnings growth, the company posted a terrific increase of 207%. The latest three year period has also seen an excellent 73% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 17% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Tarczynski's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Tarczynski's P/E

The latest share price surge wasn't enough to lift Tarczynski's P/E close to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Tarczynski 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. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. 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 2 warning signs for Tarczynski you should be aware of, and 1 of them is significant.

Of course, you might also be able to find a better stock than Tarczynski. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.