Vertiseit AB (publ) (STO:VERT B) Looks Just Right With A 34% Price Jump

Vertiseit AB (publ) (STO:VERT B) shares have continued their recent momentum with a 34% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 27% in the last year.

Since its price has surged higher, Vertiseit may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 40x, since almost half of all companies in Sweden have P/E ratios under 22x and even P/E's lower than 13x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times have been advantageous for Vertiseit as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Vertiseit

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

Is There Enough Growth For Vertiseit?

The only time you'd be truly comfortable seeing a P/E as steep as Vertiseit's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 156% last year. The latest three year period has also seen an excellent 172% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 41% per year during the coming three years according to the only analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 20% each year, which is noticeably less attractive.

In light of this, it's understandable that Vertiseit's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Vertiseit's P/E?

Vertiseit's P/E is flying high just like its stock has during the last month. 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 Vertiseit maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Vertiseit is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Vertiseit'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.