Further Upside For Kino Polska TV Spolka Akcyjna (WSE:KPL) Shares Could Introduce Price Risks After 26% Bounce

Kino Polska TV Spolka Akcyjna (WSE:KPL) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 51%.

Although its price has surged higher, Kino Polska TV Spolka Akcyjna's price-to-earnings (or "P/E") ratio of 6.1x 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 Kino Polska TV Spolka Akcyjna as its earnings have been rising very briskly. 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.

Check out our latest analysis for Kino Polska TV Spolka Akcyjna

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

How Is Kino Polska TV Spolka Akcyjna's Growth Trending?

Kino Polska TV Spolka Akcyjna's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 36% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 69% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 17% shows it's about the same on an annualised basis.

With this information, we find it odd that Kino Polska TV Spolka Akcyjna is trading at a P/E lower than the market. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Bottom Line On Kino Polska TV Spolka Akcyjna's P/E

Despite Kino Polska TV Spolka Akcyjna's shares building up a head of steam, its P/E still lags most other companies. 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 Kino Polska TV Spolka Akcyjna currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Kino Polska TV Spolka Akcyjna with six simple checks will allow you to discover any risks that could be an issue.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.