Stofe Buhusi S.A. (BVB:STOF) Stock Rockets 38% But Many Are Still Ignoring The Company

Those holding Stofe Buhusi S.A. (BVB:STOF) shares would be relieved that the share price has rebounded 38% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

In spite of the firm bounce in price, given about half the companies in Romania have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Stofe Buhusi as an attractive investment with its 8.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Stofe Buhusi certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Stofe Buhusi

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Stofe Buhusi's earnings, revenue and cash flow.

Is There Any Growth For Stofe Buhusi?

There's an inherent assumption that a company should underperform the market for P/E ratios like Stofe Buhusi's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 215%. The strong recent performance means it was also able to grow EPS by 324% 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 10% shows it's noticeably more attractive on an annualised basis.

With this information, we find it odd that Stofe Buhusi is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

The latest share price surge wasn't enough to lift Stofe Buhusi's P/E close to the market median. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Stofe Buhusi revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about these 4 warning signs we've spotted with Stofe Buhusi (including 2 which are potentially serious).

Of course, you might also be able to find a better stock than Stofe Buhusi. 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.