Shoper S.A. (WSE:SHO) Stocks Shoot Up 34% But Its P/E Still Looks Reasonable

Shoper S.A. (WSE:SHO) shareholders have had their patience rewarded with a 34% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Following the firm bounce in price, given close to half the companies in Poland have price-to-earnings ratios (or "P/E's") below 12x, you may consider Shoper as a stock to avoid entirely with its 39.7x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Shoper has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out 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.

Does Growth Match 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.

Taking a look back first, we see that the company grew earnings per share by an impressive 53% last year. Pleasingly, EPS has also lifted 100% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 29% per annum over the next three years. With the market only predicted to deliver 10% per annum, the company is positioned for a stronger earnings result.

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

What We Can Learn From Shoper's P/E?

Shares in Shoper have built up some good momentum lately, which has really inflated its P/E. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Shoper maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Shoper.

If these risks are making you reconsider your opinion on Shoper, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.