Not Many Are Piling Into Hub.Tech SA (WSE:HUB) Stock Yet As It Plummets 27%

The Hub.Tech SA (WSE:HUB) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 34% in that time.

Even after such a large drop in price, given about half the companies in Poland have price-to-earnings ratios (or "P/E's") above 13x, you may still consider Hub.Tech as a highly attractive investment with its 5.9x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

The earnings growth achieved at Hub.Tech over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

See our latest analysis for Hub.Tech

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

Is There Any Growth For Hub.Tech?

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

Retrospectively, the last year delivered an exceptional 16% gain to the company's bottom line. Pleasingly, EPS has also lifted 432% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 10% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that Hub.Tech is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Hub.Tech's P/E?

Having almost fallen off a cliff, Hub.Tech's share price has pulled its P/E way down as well. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Hub.Tech currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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.

Before you take the next step, you should know about the 2 warning signs for Hub.Tech that we have uncovered.

Of course, you might also be able to find a better stock than Hub.Tech. 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.