Premium Snacks Nordic AB (NGM:SNX) Stocks Shoot Up 31% But Its P/E Still Looks Reasonable
Premium Snacks Nordic AB (NGM:SNX) shares have continued their recent momentum with a 31% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 39% in the last year.
Following the firm bounce in price, Premium Snacks Nordic's price-to-earnings (or "P/E") ratio of 51.7x 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 23x and even P/E's below 14x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.
Recent times have been advantageous for Premium Snacks Nordic as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.
See our latest analysis for Premium Snacks Nordic
What Are Growth Metrics Telling Us About The High P/E?
Premium Snacks Nordic's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 144% last year. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Turning to the outlook, the next year should generate growth of 252% as estimated by the lone analyst watching the company. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.
With this information, we can see why Premium Snacks Nordic 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 Bottom Line On Premium Snacks Nordic's P/E
The strong share price surge has got Premium Snacks Nordic's P/E rushing to great heights as well. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
As we suspected, our examination of Premium Snacks Nordic'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. It's hard to see the share price falling strongly in the near future under these circumstances.
Before you settle on your opinion, we've discovered 3 warning signs for Premium Snacks Nordic (1 can't be ignored!) that you should be aware of.
If you're unsure about the strength of Premium Snacks Nordic's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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This article by Simply Wall St is general in nature. 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.
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About OM:SNX
Premium Snacks Nordic
Engages in the development, manufacture, sale, import, and export of snacks under the Exotic Snacks and Gårdschips brand names in Sweden and internationally.
Adequate balance sheet and fair value.
