7FIT S.A. (WSE:7FT) Stock Rockets 34% But Many Are Still Ignoring The Company

Despite an already strong run, 7FIT S.A. (WSE:7FT) shares have been powering on, with a gain of 34% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that 7FIT's price-to-earnings (or "P/E") ratio of 12.5x right now seems quite "middle-of-the-road" compared to the market in Poland, where the median P/E ratio is around 13x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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7FIT certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for 7FIT

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 7FIT's earnings, revenue and cash flow.

How Is 7FIT's Growth Trending?

In order to justify its P/E ratio, 7FIT would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 40% last year. The strong recent performance means it was also able to grow EPS by 202% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

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 curious that 7FIT's P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On 7FIT's P/E

7FIT appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

We've established that 7FIT currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for 7FIT that you should be aware of.

If you're unsure about the strength of 7FIT's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.