Some Przedsiebiorstwa Telekomunikacyjnego TELGAM S.A. (WSE:TLG) Shareholders Look For Exit As Shares Take 27% Pounding

Przedsiebiorstwa Telekomunikacyjnego TELGAM S.A. (WSE:TLG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 11% share price drop.

Even after such a large drop in price, given around half the companies in Poland have price-to-earnings ratios (or "P/E's") below 13x, you may still consider Przedsiebiorstwa Telekomunikacyjnego TELGAM as a stock to potentially avoid with its 19x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

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With earnings growth that's exceedingly strong of late, Przedsiebiorstwa Telekomunikacyjnego TELGAM 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 Przedsiebiorstwa Telekomunikacyjnego TELGAM

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Przedsiebiorstwa Telekomunikacyjnego TELGAM will help you shine a light on its historical performance.

Does Growth Match The High P/E?

In order to justify its P/E ratio, Przedsiebiorstwa Telekomunikacyjnego TELGAM would need to produce impressive growth in excess of the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 90% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 18% shows it's noticeably less attractive on an annualised basis.

In light of this, it's alarming that Przedsiebiorstwa Telekomunikacyjnego TELGAM's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Bottom Line On Przedsiebiorstwa Telekomunikacyjnego TELGAM's P/E

Przedsiebiorstwa Telekomunikacyjnego TELGAM's P/E hasn't come down all the way after its stock plunged. 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.

Our examination of Przedsiebiorstwa Telekomunikacyjnego TELGAM revealed its three-year earnings trends aren't impacting its high P/E anywhere near as much as we would have predicted, given they look worse than current market expectations. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Having said that, be aware Przedsiebiorstwa Telekomunikacyjnego TELGAM is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning.

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.