ATM Grupa S.A.'s (WSE:ATG) Shares Leap 27% Yet They're Still Not Telling The Full Story

ATM Grupa S.A. (WSE:ATG) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking further back, the 18% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, given about half the companies in Poland have price-to-earnings ratios (or "P/E's") above 13x, you may still consider ATM Grupa as an attractive investment with its 9.6x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

ATM Grupa has been doing a good job lately as it's been growing earnings at a solid pace. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Check out our latest analysis for ATM Grupa

Although there are no analyst estimates available for ATM Grupa, 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 ATM Grupa?

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

Taking a look back first, we see that the company managed to grow earnings per share by a handy 9.5% last year. This was backed up an excellent period prior to see EPS up by 152% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 9.0% shows it's noticeably more attractive on an annualised basis.

With this information, we find it odd that ATM Grupa 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 ATM Grupa's P/E?

The latest share price surge wasn't enough to lift ATM Grupa's P/E close to the market median. 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 ATM Grupa 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for ATM Grupa that you should be aware of.

You might be able to find a better investment than ATM Grupa. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.