Calviks AB (publ) (STO:CALVIK) Screens Well But There Might Be A Catch

When close to half the companies in Sweden have price-to-earnings ratios (or "P/E's") above 24x, you may consider Calviks AB (publ) (STO:CALVIK) as an attractive investment with its 18.5x 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.

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Recent times have been advantageous for Calviks as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Calviks

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

How Is Calviks' Growth Trending?

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

Retrospectively, the last year delivered an exceptional 113% gain to the company's bottom line. Still, incredibly EPS has fallen 22% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 53% each year as estimated by the only analyst watching the company. That's shaping up to be materially higher than the 18% per annum growth forecast for the broader market.

With this information, we find it odd that Calviks is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Calviks 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.

Before you take the next step, you should know about the 1 warning sign for Calviks that we have uncovered.

If these risks are making you reconsider your opinion on Calviks, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.