S.C. Helios S.A. (BVB:HEAL) Stock Rockets 29% But Many Are Still Ignoring The Company

S.C. Helios S.A. (BVB:HEAL) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, S.C. Helios' price-to-earnings (or "P/E") ratio of 7.6x might still make it look like a buy right now compared to the market in Romania, where around half of the companies have P/E ratios above 13x and even P/E's above 36x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

S.C. Helios 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 that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for S.C. Helios

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 S.C. Helios' earnings, revenue and cash flow.

Is There Any Growth For S.C. Helios?

In order to justify its P/E ratio, S.C. Helios would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 35%. The strong recent performance means it was also able to grow EPS by 53% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

In contrast to the company, the rest of the market is expected to decline by 6.2% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

In light of this, it's quite peculiar that S.C. Helios' P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader market.

The Final Word

S.C. Helios' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of S.C. Helios revealed its growing earnings over the medium-term aren't contributing to its P/E anywhere near as much as we would have predicted, given the market is set to shrink. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. One major risk is whether its earnings trajectory can keep outperforming under these tough market conditions. At least the risk of a price drop looks to be subdued, but investors think future earnings could see a lot of volatility.

Before you take the next step, you should know about the 2 warning signs for S.C. Helios that we have uncovered.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.