Netel Holding AB (publ) (STO:NETEL) Stock Rockets 48% But Many Are Still Ignoring The Company

Netel Holding AB (publ) (STO:NETEL) shares have continued their recent momentum with a 48% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 29% in the last twelve months.

Even after such a large jump in price, Netel Holding's price-to-earnings (or "P/E") ratio of 15.5x might still make it look like a buy right now compared to the market in Sweden, where around half of the companies have P/E ratios above 24x and even P/E's above 38x are quite common. 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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Netel Holding hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Netel Holding

Keen to find out how analysts think Netel Holding's future stacks up against the industry? In that case, our free report is a great place to start.

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

The only time you'd be truly comfortable seeing a P/E as low as Netel Holding's is when the company's growth is on track to lag the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 61%. This means it has also seen a slide in earnings over the longer-term as EPS is down 45% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 47% per annum during the coming three years according to the two analysts following the company. That's shaping up to be materially higher than the 18% per annum growth forecast for the broader market.

In light of this, it's peculiar that Netel Holding'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.

The Bottom Line On Netel Holding's P/E

Netel Holding's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

We've established that Netel Holding currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. 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.

Having said that, be aware Netel Holding is showing 4 warning signs in our investment analysis, and 2 of those are potentially serious.

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.