Market Participants Recognise PCF Group Spólka Akcyjna's (WSE:PCF) Earnings

When close to half the companies in Poland have price-to-earnings ratios (or "P/E's") below 14x, you may consider PCF Group Spólka Akcyjna (WSE:PCF) as a stock to avoid entirely with its 56.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

PCF Group Spólka Akcyjna certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for PCF Group Spólka Akcyjna

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 PCF Group Spólka Akcyjna's earnings, revenue and cash flow.

How Is PCF Group Spólka Akcyjna's Growth Trending?

In order to justify its P/E ratio, PCF Group Spólka Akcyjna would need to produce outstanding growth well in excess of the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 78% last year. Pleasingly, EPS has also lifted 67% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 6.8% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's understandable that PCF Group Spólka Akcyjna's P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that PCF Group Spólka Akcyjna maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Having said that, be aware PCF Group Spólka Akcyjna is showing 2 warning signs in our investment analysis, and 1 of those is significant.

You might be able to find a better investment than PCF Group Spólka Akcyjna. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (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.
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