Market Might Still Lack Some Conviction On Rank Progress S.A. (WSE:RNK) Even After 34% Share Price Boost

Despite an already strong run, Rank Progress S.A. (WSE:RNK) shares have been powering on, with a gain of 34% in the last thirty days. The last 30 days bring the annual gain to a very sharp 62%.

Although its price has surged higher, it's still not a stretch to say that Rank Progress' price-to-earnings (or "P/E") ratio of 11.2x right now seems quite "middle-of-the-road" compared to the market in Poland, where the median P/E ratio is around 13x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

As an illustration, earnings have deteriorated at Rank Progress over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing earnings performance behind them over the coming period, which has kept the P/E from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

View our latest analysis for Rank Progress

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 Rank Progress' earnings, revenue and cash flow.

How Is Rank Progress' Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Rank Progress' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 38% 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 1,095% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 8.5% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Rank Progress' P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Rank Progress' P/E

Rank Progress' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Rank Progress currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market 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.

It is also worth noting that we have found 5 warning signs for Rank Progress (2 shouldn't be ignored!) that you need to take into consideration.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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