It's Down 26% But Fasadgruppen Group AB (publ) (STO:FG) Could Be Riskier Than It Looks

To the annoyance of some shareholders, Fasadgruppen Group AB (publ) (STO:FG) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 27% in that time.

Even after such a large drop in price, given about half the companies in Sweden have price-to-earnings ratios (or "P/E's") above 24x, you may still consider Fasadgruppen Group as an attractive investment with its 15.2x 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.

Fasadgruppen Group hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

See our latest analysis for Fasadgruppen Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Fasadgruppen Group.

Is There Any Growth For Fasadgruppen Group?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 40%. That put a dampener on the good run it was having over the longer-term as its three-year EPS growth is still a noteworthy 22% in total. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.

Looking ahead now, EPS is anticipated to climb by 44% each year during the coming three years according to the lone analyst following the company. That's shaping up to be materially higher than the 20% per annum growth forecast for the broader market.

In light of this, it's peculiar that Fasadgruppen Group's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Fasadgruppen Group's P/E?

The softening of Fasadgruppen Group's shares means its P/E is now sitting at a pretty low level. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Fasadgruppen Group'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. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It is also worth noting that we have found 3 warning signs for Fasadgruppen Group 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.