The Market Doesn't Like What It Sees From Intellego Technologies AB's (STO:INT) Earnings Yet As Shares Tumble 54%

Unfortunately for some shareholders, the Intellego Technologies AB (STO:INT) share price has dived 54% in the last thirty days, prolonging recent pain. Still, a bad month hasn't completely ruined the past year with the stock gaining 63%, which is great even in a bull market.

Although its price has dipped substantially, Intellego Technologies may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 4.6x, since almost half of all companies in Sweden have P/E ratios greater than 23x and even P/E's higher than 36x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

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Recent times have been quite advantageous for Intellego Technologies as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Intellego Technologies will help you shine a light on its historical performance.

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

Intellego Technologies' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 222%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 29% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Intellego Technologies' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Intellego Technologies' P/E

Intellego Technologies' P/E looks about as weak as its stock price lately. 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 Intellego Technologies maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

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

You might be able to find a better investment than Intellego Technologies. 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).

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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.