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華爾街日報The Market Doesn't Like What It Sees From ImPulse Growth AD's (BUL:IMP) Earnings Yet As Shares Tumble 48%
ImPulse Growth AD (BUL:IMP) shareholders that were waiting for something to happen have been dealt a blow with a 48% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 54% share price decline.
Even after such a large drop in price, ImPulse Growth AD may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 5.3x, since almost half of all companies in Bulgaria have P/E ratios greater than 12x and even P/E's higher than 28x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
For instance, ImPulse Growth AD's receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, 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 ImPulse Growth AD
What Are Growth Metrics Telling Us About The Low P/E?
There's an inherent assumption that a company should far underperform the market for P/E ratios like ImPulse Growth AD's to be considered reasonable.
Retrospectively, the last year delivered a frustrating 60% decrease to the company's bottom line. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Comparing that to the market, which is predicted to deliver 21% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.
In light of this, it's understandable that ImPulse Growth AD's 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 ImPulse Growth AD's P/E
Having almost fallen off a cliff, ImPulse Growth AD's share price has pulled its P/E way down as well. 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.
As we suspected, our examination of ImPulse Growth AD revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.
There are also other vital risk factors to consider and we've discovered 4 warning signs for ImPulse Growth AD (3 shouldn't be ignored!) that you should be aware of before investing here.
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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