There Is A Reason B3 Consulting Group AB (publ)'s (STO:B3) Price Is Undemanding

With a price-to-earnings (or "P/E") ratio of 7.1x B3 Consulting Group AB (publ) (STO:B3) may be sending very bullish signals at the moment, given that almost half of all companies in Sweden have P/E ratios greater than 23x and even P/E's higher than 39x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

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Recent times have been advantageous for B3 Consulting Group as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 out of favour.

View our latest analysis for B3 Consulting Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on B3 Consulting Group.

Is There Any Growth For B3 Consulting Group?

There's an inherent assumption that a company should far underperform the market for P/E ratios like B3 Consulting Group's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 118% last year. EPS has also lifted 17% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 6.1% per year as estimated by the dual analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 19% each year, which is noticeably more attractive.

In light of this, it's understandable that B3 Consulting Group's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On B3 Consulting Group's P/E

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.

We've established that B3 Consulting Group maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for B3 Consulting Group (2 don't sit too well with us!) that we have uncovered.

Of course, you might also be able to find a better stock than B3 Consulting Group. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.