Nasdaq
华尔街日报Sylvania Platinum Limited (LON:SLP) Looks Just Right With A 27% Price Jump
Sylvania Platinum Limited (LON:SLP) shareholders have had their patience rewarded with a 27% share price jump in the last month. The annual gain comes to 155% following the latest surge, making investors sit up and take notice.
After such a large jump in price, Sylvania Platinum's price-to-earnings (or "P/E") ratio of 18.1x might make it look like a sell right now compared to the market in the United Kingdom, where around half of the companies have P/E ratios below 16x and even P/E's below 10x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.
With earnings growth that's superior to most other companies of late, Sylvania Platinum has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.
Check out our latest analysis for Sylvania Platinum
Is There Enough Growth For Sylvania Platinum?
The only time you'd be truly comfortable seeing a P/E as high as Sylvania Platinum's is when the company's growth is on track to outshine the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 191% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 62% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.
Turning to the outlook, the next three years should generate growth of 55% per annum as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 15% per year growth forecast for the broader market.
In light of this, it's understandable that Sylvania Platinum's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Final Word
Sylvania Platinum shares have received a push in the right direction, but its P/E is elevated too. 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.
As we suspected, our examination of Sylvania Platinum's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Sylvania Platinum (at least 1 which is potentially serious), and understanding these should be part of your investment process.
You might be able to find a better investment than Sylvania Platinum. 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.