Wihlborgs Fastigheter AB (publ)'s (STO:WIHL) Share Price Matching Investor Opinion

When close to half the companies in Sweden have price-to-earnings ratios (or "P/E's") below 22x, you may consider Wihlborgs Fastigheter AB (publ) (STO:WIHL) as a stock to avoid entirely with its 63.5x 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 so lofty.

Wihlborgs Fastigheter hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out our latest analysis for Wihlborgs Fastigheter

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

Does Growth Match The High P/E?

Wihlborgs Fastigheter'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.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 79% in total over the last three years. 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 248% during the coming year according to the five analysts following the company. With the market only predicted to deliver 31%, the company is positioned for a stronger earnings result.

With this information, we can see why Wihlborgs Fastigheter 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.

What We Can Learn From Wihlborgs Fastigheter's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Wihlborgs Fastigheter maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Wihlborgs Fastigheter (1 shouldn't be ignored!) that you should be aware of before investing here.

You might be able to find a better investment than Wihlborgs Fastigheter. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.