Investors Appear Satisfied With Nordisk Bergteknik AB (publ)'s (STO:NORB B) Prospects As Shares Rocket 26%

Despite an already strong run, Nordisk Bergteknik AB (publ) (STO:NORB B) shares have been powering on, with a gain of 26% in the last thirty days. Looking further back, the 11% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, Nordisk Bergteknik's price-to-earnings (or "P/E") ratio of 37x might make it look like a strong sell right now compared to the market in Sweden, where around half of the companies have P/E ratios below 22x and even P/E's below 14x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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Nordisk Bergteknik certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Nordisk Bergteknik

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

Is There Enough Growth For Nordisk Bergteknik?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Nordisk Bergteknik's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 31%. Still, incredibly EPS has fallen 77% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 199% over the next year. With the market only predicted to deliver 29%, the company is positioned for a stronger earnings result.

With this information, we can see why Nordisk Bergteknik is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

The strong share price surge has got Nordisk Bergteknik's P/E rushing to great heights as well. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Nordisk Bergteknik's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for Nordisk Bergteknik (1 makes us a bit uncomfortable!) that you need to take into consideration.

You might be able to find a better investment than Nordisk Bergteknik. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.