Even With A 34% Surge, Cautious Investors Are Not Rewarding Zespól Elektrocieplowni Wroclawskich KOGENERACJA S.A.'s (WSE:KGN) Performance Completely

Despite an already strong run, Zespól Elektrocieplowni Wroclawskich KOGENERACJA S.A. (WSE:KGN) shares have been powering on, with a gain of 34% in the last thirty days. The last month tops off a massive increase of 128% in the last year.

In spite of the firm bounce in price, Zespól Elektrocieplowni Wroclawskich KOGENERACJA may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 2.7x, since almost half of all companies in Poland have P/E ratios greater than 13x and even P/E's higher than 27x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Zespól Elektrocieplowni Wroclawskich KOGENERACJA certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Zespól Elektrocieplowni Wroclawskich KOGENERACJA

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zespól Elektrocieplowni Wroclawskich KOGENERACJA.

Is There Any Growth For Zespól Elektrocieplowni Wroclawskich KOGENERACJA?

In order to justify its P/E ratio, Zespól Elektrocieplowni Wroclawskich KOGENERACJA would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered an exceptional 357% gain to the company's bottom line. The latest three year period has also seen an excellent 87% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 56% over the next year. Meanwhile, the rest of the market is forecast to only expand by 7.8%, which is noticeably less attractive.

With this information, we find it odd that Zespól Elektrocieplowni Wroclawskich KOGENERACJA is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Zespól Elektrocieplowni Wroclawskich KOGENERACJA's P/E

Zespól Elektrocieplowni Wroclawskich KOGENERACJA's recent share price jump still sees its P/E sitting firmly flat on the ground. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Zespól Elektrocieplowni Wroclawskich KOGENERACJA's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Zespól Elektrocieplowni Wroclawskich KOGENERACJA you should know about.

Of course, you might also be able to find a better stock than Zespól Elektrocieplowni Wroclawskich KOGENERACJA. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.