Market Might Still Lack Some Conviction On Intellego Technologies AB (STO:INT) Even After 26% Share Price Boost

Those holding Intellego Technologies AB (STO:INT) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking back a bit further, it's encouraging to see the stock is up 91% in the last year.

In spite of the firm bounce in price, Intellego Technologies may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 9x, since almost half of all companies in Sweden have P/E ratios greater than 24x and even P/E's higher than 44x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Intellego Technologies certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. 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 Intellego Technologies

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Intellego Technologies' earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as depressed as Intellego Technologies' is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 188% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 42,957% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 28% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Intellego Technologies' P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Intellego Technologies' P/E?

Even after such a strong price move, Intellego Technologies' P/E still trails the rest of the market significantly. 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 Intellego Technologies currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You need to take note of risks, for example - Intellego Technologies has 3 warning signs (and 1 which is concerning) we think you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.