AngloGold Ashanti plc (NYSE:AU) Stock Rockets 37% But Many Are Still Ignoring The Company

Despite an already strong run, AngloGold Ashanti plc (NYSE:AU) shares have been powering on, with a gain of 37% in the last thirty days. The last month tops off a massive increase of 259% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that AngloGold Ashanti's price-to-earnings (or "P/E") ratio of 19.9x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 19x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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AngloGold Ashanti certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, 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.

View our latest analysis for AngloGold Ashanti

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

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

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

Retrospectively, the last year delivered an exceptional 238% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 381% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 96% during the coming year according to the eight analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 16%, which is noticeably less attractive.

With this information, we find it interesting that AngloGold Ashanti 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 Final Word

AngloGold Ashanti's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of AngloGold Ashanti'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.

It is also worth noting that we have found 1 warning sign for AngloGold Ashanti that you need to take into consideration.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.