ByggPartner Gruppen AB (publ)'s (STO:BYGGP) Shares Bounce 28% But Its Business Still Trails The Market

Despite an already strong run, ByggPartner Gruppen AB (publ) (STO:BYGGP) shares have been powering on, with a gain of 28% in the last thirty days. The last month tops off a massive increase of 139% in the last year.

Although its price has surged higher, given about half the companies in Sweden have price-to-earnings ratios (or "P/E's") above 23x, you may still consider ByggPartner Gruppen as an attractive investment with its 18.7x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Recent times have been quite advantageous for ByggPartner Gruppen as its earnings have been rising very briskly. 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 ByggPartner Gruppen

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 ByggPartner Gruppen's earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The Low P/E?

ByggPartner Gruppen's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 100%. 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 29% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that ByggPartner Gruppen's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On ByggPartner Gruppen's P/E

Despite ByggPartner Gruppen's shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that ByggPartner Gruppen maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for ByggPartner Gruppen that you need to take into consideration.

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.