More Unpleasant Surprises Could Be In Store For ES Energy Save Holding AB (publ)'s (NGM:ESGR B) Shares After Tumbling 34%

Unfortunately for some shareholders, the ES Energy Save Holding AB (publ) (NGM:ESGR B) share price has dived 34% in the last thirty days, prolonging recent pain. The good news is that in the last year, the stock has shone bright like a diamond, gaining 210%.

Even after such a large drop in price, it's still not a stretch to say that ES Energy Save Holding's price-to-earnings (or "P/E") ratio of 19.1x right now seems quite "middle-of-the-road" compared to the market in Sweden, where the median P/E ratio is around 19x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

We'd have to say that with no tangible growth over the last year, ES Energy Save Holding's earnings have been unimpressive. It might be that many expect the uninspiring earnings performance to only match most other companies at best over the coming period, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

View our latest analysis for ES Energy Save Holding

Although there are no analyst estimates available for ES Energy Save Holding, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Does Growth Match The P/E?

ES Energy Save Holding's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. Likewise, not much has changed from three years ago as earnings have been stuck during that whole time. Therefore, it's fair to say that earnings growth has definitely eluded the company recently.

Comparing that to the market, which is predicted to deliver 16% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's curious that ES Energy Save Holding's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

What We Can Learn From ES Energy Save Holding's P/E?

ES Energy Save Holding's plummeting stock price has brought its P/E right back to the rest of the market. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that ES Energy Save Holding currently trades on a higher than expected P/E since its recent three-year growth is lower than the wider market forecast. Right now we are uncomfortable with the P/E as this earnings performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for ES Energy Save Holding (1 shouldn't be ignored) you should be aware of.

If you're unsure about the strength of ES Energy Save Holding'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. 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.