Planet B2B S.A.'s (WSE:P2B) P/E Is Still On The Mark Following 28% Share Price Bounce

Planet B2B S.A. (WSE:P2B) shares have continued their recent momentum with a 28% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 38%.

Since its price has surged higher, Planet B2B's price-to-earnings (or "P/E") ratio of 15.5x might make it look like a sell right now compared to the market in Poland, where around half of the companies have P/E ratios below 13x and even P/E's below 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

We've discovered 4 warning signs about Planet B2B. View them for free.

With earnings growth that's exceedingly strong of late, Planet B2B has been doing very well. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Planet B2B

Although there are no analyst estimates available for Planet B2B, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Planet B2B's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like Planet B2B's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 174% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 189% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 13% shows it's noticeably more attractive on an annualised basis.

In light of this, it's understandable that Planet B2B'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 Bottom Line On Planet B2B's P/E

The large bounce in Planet B2B's shares has lifted the company's P/E to a fairly high level. 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 Planet B2B maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Planet B2B is showing 4 warning signs in our investment analysis, and 3 of those are significant.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.