Positive Sentiment Still Eludes Kambi Group plc (STO:KAMBI) Following 30% Share Price Slump

To the annoyance of some shareholders, Kambi Group plc (STO:KAMBI) shares are down a considerable 30% 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 47% in that time.

Although its price has dipped substantially, given about half the companies in Sweden have price-to-earnings ratios (or "P/E's") above 22x, you may still consider Kambi Group as an attractive investment with its 18.2x 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.

Kambi Group 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 Kambi Group

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Does Growth Match The Low P/E?

There's an inherent assumption that a company should underperform the market for P/E ratios like Kambi Group's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 43% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 37% overall. 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 19% each year during the coming three years according to the four analysts following the company. That's shaping up to be similar to the 19% per annum growth forecast for the broader market.

With this information, we find it odd that Kambi Group is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On Kambi Group's P/E

Kambi Group's P/E has taken a tumble along with its share price. 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 Kambi Group's analyst forecasts revealed that its market-matching 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 outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Before you settle on your opinion, we've discovered 3 warning signs for Kambi Group that you should be aware of.

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.