Shoper S.A. (WSE:SHO) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

The Shoper S.A. (WSE:SHO) share price has fared very poorly over the last month, falling by a substantial 26%. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Although its price has dipped substantially, Shoper may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 66.1x, since almost half of all companies in Poland have P/E ratios under 11x and even P/E's lower than 6x 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.

Shoper certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Shoper

Keen to find out how analysts think Shoper's future stacks up against the industry? In that case, our free report is a great place to start.

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

The only time you'd be truly comfortable seeing a P/E as steep as Shoper's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 122% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 657% 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.

Shifting to the future, estimates from the three analysts covering the company suggest earnings growth will be highly resilient over the next year growing by 59%. Meanwhile, the broader market is forecast to contract by 4.6%, which would indicate the company is doing very well.

With this information, we can see why Shoper is trading at such a high P/E compared to the market. At this time, shareholders aren't keen to offload something that is potentially eyeing a much more prosperous future.

The Bottom Line On Shoper's P/E

A significant share price dive has done very little to deflate Shoper's very lofty P/E. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Shoper's analyst forecasts revealed that its superior earnings outlook against a shaky market is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. We still remain cautious about the company's ability to keep swimming against the current of the broader market turmoil. Otherwise, it's hard to see the share price falling strongly in the near future under the current growth expectations.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Shoper (of which 1 is significant!) you should know about.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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.