Market Might Still Lack Some Conviction On Sezzle Inc. (NASDAQ:SEZL) Even After 33% Share Price Boost

Despite an already strong run, Sezzle Inc. (NASDAQ:SEZL) shares have been powering on, with a gain of 33% in the last thirty days. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, there still wouldn't be many who think Sezzle's price-to-earnings (or "P/E") ratio of 15.5x is worth a mention when the median P/E in the United States is similar at about 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Sezzle certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Sezzle

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

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

The only time you'd be comfortable seeing a P/E like Sezzle's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 419% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 17% as estimated by the dual analysts watching the company. With the market only predicted to deliver 15%, the company is positioned for a stronger earnings result.

With this information, we find it interesting that Sezzle is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Sezzle's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

Our examination of Sezzle's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Sezzle (2 make us uncomfortable!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Sezzle, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.