Not Many Are Piling Into I-Tech AB (STO:ITECH) Stock Yet As It Plummets 28%

I-Tech AB (STO:ITECH) shareholders won't be pleased to see that the share price has had a very rough month, dropping 28% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 77%, which is great even in a bull market.

Although its price has dipped substantially, there still wouldn't be many who think I-Tech's price-to-earnings (or "P/E") ratio of 22.3x is worth a mention when the median P/E in Sweden is similar at about 23x. 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.

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Recent times have been advantageous for I-Tech as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for I-Tech

Want the full picture on analyst estimates for the company? Then our free report on I-Tech will help you uncover what's on the horizon.

Is There Some Growth For I-Tech?

I-Tech'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.

Retrospectively, the last year delivered an exceptional 106% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 28% per annum over the next three years. With the market only predicted to deliver 18% per annum, the company is positioned for a stronger earnings result.

In light of this, it's curious that I-Tech's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

I-Tech's plummeting stock price has brought its P/E right back to the rest of 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 I-Tech's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for I-Tech that you need to be mindful of.

If you're unsure about the strength of I-Tech'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.