Why Investors Shouldn't Be Surprised By Polskie Towarzystwo Wspierania Przedsiebiorczosci S.A.'s (WSE:PTW) 27% Share Price Surge

Polskie Towarzystwo Wspierania Przedsiebiorczosci S.A. (WSE:PTW) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Looking further back, the 12% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, Polskie Towarzystwo Wspierania Przedsiebiorczosci may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 21.6x, since almost half of all companies in Poland have P/E ratios under 12x and even P/E's lower than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

For instance, Polskie Towarzystwo Wspierania Przedsiebiorczosci's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

Check out our latest analysis for Polskie Towarzystwo Wspierania Przedsiebiorczosci

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What Are Growth Metrics Telling Us About The High P/E?

Polskie Towarzystwo Wspierania Przedsiebiorczosci's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered a frustrating 62% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 104% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Comparing that to the market, which is only predicted to deliver 17% 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 Polskie Towarzystwo Wspierania Przedsiebiorczosci's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Final Word

The strong share price surge has got Polskie Towarzystwo Wspierania Przedsiebiorczosci's P/E rushing to great heights as well. 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 Polskie Towarzystwo Wspierania Przedsiebiorczosci 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.

It is also worth noting that we have found 4 warning signs for Polskie Towarzystwo Wspierania Przedsiebiorczosci that you need to take into consideration.

If these risks are making you reconsider your opinion on Polskie Towarzystwo Wspierania Przedsiebiorczosci, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com