There's Reason For Concern Over Oponeo.pl S.A.'s (WSE:OPN) Massive 29% Price Jump

Oponeo.pl S.A. (WSE:OPN) shareholders have had their patience rewarded with a 29% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 94%.

In spite of the firm bounce in price, it's still not a stretch to say that Oponeo.pl's price-to-earnings (or "P/E") ratio of 11.9x 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.

Recent times have been advantageous for Oponeo.pl as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Oponeo.pl

Want the full picture on analyst estimates for the company? Then our free report on Oponeo.pl will help you uncover what's on the horizon.

Is There Some Growth For Oponeo.pl?

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

Retrospectively, the last year delivered an exceptional 218% gain to the company's bottom line. The latest three year period has also seen an excellent 182% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the two analysts covering the company suggest earnings growth is heading into negative territory, declining 1.2% each year over the next three years. With the market predicted to deliver 9.4% growth per year, that's a disappointing outcome.

With this information, we find it concerning that Oponeo.pl is trading at a fairly similar P/E to the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the negative growth outlook.

What We Can Learn From Oponeo.pl's P/E?

Its shares have lifted substantially and now Oponeo.pl's P/E is also back up to the market median. 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 Oponeo.pl currently trades on a higher than expected P/E for a company whose earnings are forecast to decline. When we see a poor outlook with earnings heading backwards, we suspect share price is at risk of declining, sending the moderate P/E lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

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

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.