Why Investors Shouldn't Be Surprised By Creepy Jar S.A.'s (WSE:CRJ) 27% Share Price Surge

Creepy Jar S.A. (WSE:CRJ) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 48% in the last twelve months.

After such a large jump in price, given close to half the companies in Poland have price-to-earnings ratios (or "P/E's") below 11x, you may consider Creepy Jar as a stock to avoid entirely with its 25.1x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Creepy Jar could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Creepy Jar

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Creepy Jar.

How Is Creepy Jar's Growth Trending?

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

Retrospectively, the last year delivered a frustrating 66% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 69% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 20% each year as estimated by the two analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 6.7% per year, which is noticeably less attractive.

In light of this, it's understandable that Creepy Jar's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Shares in Creepy Jar have built up some good momentum lately, which has really inflated its P/E. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Creepy Jar's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Creepy Jar (1 doesn't sit too well with us) you should be aware of.

If these risks are making you reconsider your opinion on Creepy Jar, 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.