ITAB Shop Concept AB (publ)'s (STO:ITAB) Shares Leap 26% Yet They're Still Not Telling The Full Story

The ITAB Shop Concept AB (publ) (STO:ITAB) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 34% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think ITAB Shop Concept's price-to-earnings (or "P/E") ratio of 20.8x is worth a mention when the median P/E in Sweden is similar at about 22x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Our free stock report includes 1 warning sign investors should be aware of before investing in ITAB Shop Concept. Read for free now.

There hasn't been much to differentiate ITAB Shop Concept's and the market's earnings growth lately. The P/E is probably moderate because investors think this modest earnings performance will continue. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

See our latest analysis for ITAB Shop Concept

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

How Is ITAB Shop Concept's Growth Trending?

The only time you'd be comfortable seeing a P/E like ITAB Shop Concept's is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 6.2% last year. This was backed up an excellent period prior to see EPS up by 169% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 37% each year over the next three years. That's shaping up to be materially higher than the 20% each year growth forecast for the broader market.

With this information, we find it interesting that ITAB Shop Concept is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On ITAB Shop Concept's P/E

ITAB Shop Concept's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

Our examination of ITAB Shop Concept's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

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

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.